Japanese builder goes bust

The building boom in Japan is well and truly over

The string of bankruptcies afflicting Japan has claimed another scalp as top custom-made house builder Shokusan Jutaku Sogo asked the courts for protection from its creditors.

The company said it was looking at a loss of 3bn yen in the year to March 2002, and was at risk of seeing its liabilities outstrip its assets if it went on.

Shokusan Jutaku has debts totalling 13.5bn yen, an insupportable burden under Japan's present straitened economic conditions.

"If the company were to continue its present operations in the worsening economic climate, losses would only accumulate," the company said in a statement.

The bankruptcy protection would help it get out of housebuilding and into more renovation work, it said.

The market for bespoke housing boomed during the 80s, but has slumped since as land prices plummeted and debts built up.

The year to March 2001 saw Shokusan make a loss of 1.7bn yen on sales of 42bn yen.

News of the court order triggered the delisting of the company from the Tokyo Stock Exchange after 30 years.

Going under

Shokusan is by no means the first construction company to go under, and will certainly not be the last.

Aoki Corp, another construction firm, was given debt forgiveness early in 2001, but still went bust in December as demand slackened and its debts piled up.

Bankruptcy is rapidly becoming a way of life in Japan as the economy continues to weaken.

Firesale behaviour at bankrupt retailer Mycal

In 2001 14 companies listed on the Tokyo Stock Exchange went under, including Mycal, the country's fourth biggest supermarket, with Its debts of as much as 1,700bn yen.

The Taisei Fire and Marine insurance company is in bankruptcy protection following the 11 September attacks on the US.

And Daiei, a leading Japanese retailer, is now working on a three-year plan to pull itself around.

It could get even worse after April, when the government removes the unlimited deposit guarantees which have protected the banking system up to now.

While ministers have made it clear that the biggest banks will be protected to forestall a full-scale meltdown of the financial system, lesser organs will receive no such help.

Most outside observers, as well as many within Japan itself, are well aware of the necessity of such a move.

But if financial instutitions begin to go under in large numbers - the regional Ishikawa Bank went bust just before the New Year, and several others are teetering - the domino effect could be severe.

Construction gloom

The construction sector is one of the most indebted and has been kept artificially afloat over the past decade by huge injections of government money intended to pump-prime the economy.

But much of the cash has gone on make-work public works projects with little long-term economic benefit.

Construction companies and general contractors are traditionally close to the Liberal Democratic Party, which has ruled Japan - with only one short break of less than a year - even since 1955.

The construction "zoku", or tribe, as the industry's many supporters in the LDP are termed, have over the years received vast sums in election expenses and other inducements, and have made sure their friends keep their chins just above water.

The fact that some parts of the construction industry is also very closely allied with Japan's 80,000-strong army of professional gangsters, known as the yakuza, has also helped keep banks and government regulators off their backs.