Japan's corporate bankruptcies rose the most in eight years in 2008 as a deepening recession weakened sales and made it harder for businesses to get funds.

Bankruptcies climbed 11 percent from a year earlier to 15,646 cases last year, the fastest pace since 2000, Tokyo Shoko Research Ltd said in Tokyo today. A total of 33 publicly traded companies went out of business in 2008, the most in the postwar period, the report said.

Japanese companies have struggled to find investors willing to purchase their debt since the collapse of Lehman Brothers Holdings Inc in September. Larger businesses are resorting to borrowing directly from banks, squeezing smaller companies out of the market for loans, said Junko Nishioka.

"The rise in bankruptcies makes banks more nervous about lending," said Nishioka, an economist at RBS Securities Japan Ltd. "The credit crunch will worsen and deepen the recession."

The world's second-largest economy shrank at an annual 12.1 percent pace last quarter, Barclays Capital estimates, the steepest decline since 1974.

Exports fell at a record pace in November, forcing companies to idle factories and fire workers.

The downturn is spreading to the domestic economy, a Cabinet Office report showed yesterday. The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, dropped to 15.9 in December, the lowest since the government started the report in August 2001.

"The severe economic deterioration is hurting profits," said Nobuo Tomoda, manager of information and publications at Tokyo Shoko Research. "Even if companies, especially small ones, manage to borrow money now, they can't pay it back. Bankruptcies could increase at a faster pace this year."

Creed Corp and Toshin Housing Co, two publicly traded real-estate companies, filed for bankruptcy last week.

Bank lending climbed 4.1 percent in December, the fastest pace in 16 years, as the global credit crisis forced companies out of the corporate debt market. The Bank of Japan last month said it would buy commercial paper for the first time to help ease the funding shortage.

"If larger companies that normally would have issued commercial paper shift to bank loans, it creates a situation in which smaller, relatively less creditworthy companies find it hard to borrow," Tokyo-based Nishioka said. "Those companies are getting shut out of the market."

The spread on three-month commercial paper issued by companies rated higher than A1 against three-month government financing bills has widened to 37 basis points from 8.5 basis points before Lehman Brothers' Sept 15 collapse.

Bank of Japan Governor Masaaki Shirakawa said last week the central bank should do more to support the economy after lowering the key interest rate to 0.1 percent in December.

Source:China Daily/Agencies