Japan’s Construction Sector Faces Crisis: Bankruptcies Surge to 11-Year High

Japan's construction industry is grappling with a significant crisis as recent data reveals that bankruptcies have surged to their highest level in 11 years. According to a report released by Tokyo Shoko Research on Tuesday, the number of business bankruptcies across the nation reached 10,006 cases in 2024, marking a 15.1% increase from the previous year. This alarming trend has raised concerns about the sustainability of smaller companies that are succumbing to mounting pressures from rising costs and labor shortages.

The construction sector has been particularly hard-hit by these challenges. A critical shortage of manpower, exacerbated by newly implemented overtime rules, has left many companies struggling to maintain their operations. The combination of these regulations and the escalating costs of materials and labor has created an untenable environment for many businesses within the industry.

The rise in bankruptcy cases can be largely attributed to these factors. Smaller firms, which typically have fewer resources to weather economic storms, are finding it increasingly difficult to stay afloat. As costs continue to rise and workforce availability dwindles, these companies face an uphill battle to remain operational. The construction industry’s struggles signal a broader economic concern, as it plays a vital role in Japan's overall economic health.

Tokyo Shoko Research's report underscores that the shortage of manpower is not just a temporary issue but a significant challenge that could have long-lasting effects on the construction sector. With new overtime regulations intended to create a better work-life balance for employees, many firms have found themselves unable to meet project demands. As a result, they are now confronting the dual pressures of reduced workforce capacity and increased operational costs.

In light of these developments, the future of Japan’s construction industry remains uncertain. Stakeholders are calling for urgent measures to address the manpower shortage and support struggling businesses. Failure to act could lead to further declines in the industry and exacerbate the economic challenges faced by Japan as a whole.