Japan Bankruptcies Top 1,000 as AI Squeezes Small Software Firms

Japan’s smaller companies are being squeezed by higher material and labor costs, chronic worker shortages tied to an aging population, and heavier financing burdens as interest rates rise. The spread of generative AI and no-code and low-code tools is adding pressure on information-service providers, allowing clients to bring simpler software and web-development work in-house and weakening contractors that depend on low prices and limited capital.

Teikoku Databank said on Aug. 10 that 1,037 businesses with liabilities of at least 10 million yen failed in July 2026, up 8.5% from a year earlier. Liabilities totaled 234.12 billion yen, while inflation-related failures reached a record 121. Bankruptcies exceeded 1,000 for a second consecutive month, the first such run since late 2009. Tokyo Shoko Research separately reported 166 information-service failures in the first half, up 18.5%.