Weak yen pushes Japan’s small importers towards bankruptcy as failures hit first-half high
Japan’s yen slump to around its weakest level since 1986 is becoming a survival test for small businesses, with weak-yen-related bankruptcies rising to 45 in the first half of 2026.
The yen’s slide to a 40-year low is turning from a currency-market story into a survival test for Japan’s small businesses, with weak-yen-related bankruptcies rising to the highest first-half level since Tokyo Shoko Research began tracking companies that cite currency weakness as a direct cause of failure in 2022.
Tokyo Shoko Research said 45 companies went bankrupt in January-June because of weak-yen pressures, up 32.3% from a year earlier and 1.3 times the level recorded in the same period last year. The research firm said the figure was the highest for any first half since the yen’s current depreciation phase began in 2022.
The increase highlights the uneven impact of Japan’s currency weakness. A cheaper yen has lifted earnings for exporters, including automakers and trading houses, but it has raised import costs for smaller firms that rely on foreign food, fuel, raw materials and merchandise. Many of these firms have limited pricing power and face intense competition, making it difficult to pass higher costs on to customers.
Wholesalers bear the brunt
The pressure was most visible in the wholesale sector, which accounted for 23 of the 45 weak-yen-related bankruptcies, or 51.1% of the total. Retailers followed with nine cases, while manufacturers recorded five, services four and transport firms three, according to Tokyo Shoko Research.
Although the number of bankruptcies rose, total liabilities fell 74.7% from a year earlier to ¥22.67 billion, suggesting that the latest wave was concentrated among small and micro-sized firms rather than large corporate failures. Tokyo Shoko Research said last year’s figure had been inflated by one major paper company bankruptcy, while this year’s cases were centred more heavily on smaller businesses.
One example was Tokyo-based Merry Time Foods, an importer of crab, shrimp and tuna from other Asian countries, which went bankrupt in May after citing weaker profitability caused by the yen’s fall and political instability in supplier countries.
Yen slump deepens import-cost squeeze
The yen sank to 162.84 per dollar overnight, its weakest level in 40 years, before trading around 162.50 in early Thursday trading, Reuters reported. The currency has come under renewed pressure from a strong US dollar and expectations that US interest rates may rise further, keeping the Japan-US rate gap wide enough to encourage demand for dollar assets.
A persistently weak yen is feeding into import costs and price pressures across Japan’s economy. Reuters reported that the currency slide, together with energy-price shocks linked to Middle East tensions, has added to inflation risks, prompting Bank of Japan officials to warn about the danger of falling behind the curve on price pressures.
That leaves the BOJ with a difficult policy trade-off. Higher interest rates could help support the yen by narrowing the gap with US rates, but they would also raise borrowing costs for smaller firms already struggling with imported inflation, wage increases and labour shortages.
FX hedges become a hidden risk
Another pressure point is emerging in foreign-exchange hedging. Some small importers have used structured products known as reverse knockout options to reduce upfront hedging costs, but these contracts can stop providing protection once the yen reaches a preset level.
Analysts estimate that many remaining knockout levels are clustered between 163 and 170 yen per dollar, just above current market levels. If the yen weakens further, more firms could lose their hedges and be forced to buy dollars in the spot market or enter new hedges at less favourable rates.
Tokyo Shoko Research expects weak-yen-related bankruptcies to remain elevated for some time, particularly among wholesalers, retailers and manufacturers with limited ability to raise prices.
The figures add to signs that Japan’s broader bankruptcy trend is worsening. Corporate bankruptcies in 2025 rose to 10,300, the highest level since 2013, as rising raw material costs and labour shortages weighed on businesses, according to an earlier Tokyo Shoko Research survey reported by Reuters.
For Japan’s small firms, the weak yen is no longer merely a market headline. It is becoming a balance-sheet problem, exposing a widening divide between large exporters that benefit from currency weakness and import-dependent businesses that are being pushed closer to insolvency.
Sources: Krungthep Turakij, Tokyo Shoko Research
