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Why Japan’s Labor Shortage Is Now Bankrupting Small Businesses
Japan is running out of working-age people, and small firms that can’t pay above inflation are going bust.
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Japan has more jobs than workers, and from 2027 its working-age population starts shrinking faster.
Japanese companies are now going bankrupt in record numbers at 2.4% unemployment, and more than half of them are failing because labor has become too expensive to keep.
For most of the past three years, Japan’s labor shortage has been read as good news. It pushed the spring wage round, known as shunto, above 5% for a third straight year and gave the Bank of Japan the wage evidence it needed to declare on October 30 that underlying inflation has reached its 2% target.
The same shortage now shows up in a darker set of numbers: record labor-related bankruptcies, a record wave of restaurant failures, pay rises at small firms that trail inflation, foreign business owners leaving under…
