Tokyo, April 13 (Bloomberg) -- Japanese corporate bankruptcies fell in March, though the outlookfor struggling companies is grim as banks write off their bad debts. Corporate failures declined 0.5 percent in March from a year ago to 1,703, said Tokyo ShokoResearch Ltd., a credit research company. Liabilities left by bankrupt companies more thantripled to 2.46 trillion yen ($19.8 billion). More companies are expected to go bust this year as banks have become more cautious aboutlending and a slowing economy will force more them out of business. Meanwhile, thegovernment's latest economic stimulus package, which forces banks to write off their bad debts,will also kick more shaky companies out of business, economists said. ``Worsening cyclical conditions, in addition to hints that banks will become firmer in addressingnon-performing loans, suggest that bankruptcies will continue to rise in the near term,'' saidMatthew Poggi, an economist at Lehman Brothers Japan Inc. before the figures were released. The decline last month was led by a 12 percent decrease among manufacturing companies anda 4.3 percent drop in construction companies. Still, the remaining seven industries recorded anincrease in bankruptcies. For the year ended March 31, company failures increased 12.2percent, which was the first rise in three years.
Impacts
The government last week said Japan's biggest banks should write off an estimated 13 trillionyen of their worst loans in two years as a way to push out these inefficient businesses out ofmarket to promote lasting economic growth. A rise in bankruptcies will force more people out of a job and dampen consumer spending. Tooffset such downside effects, government officials have proposed measures to boost the mobilityin the labor market, such as creating new jobs in the information technology related industries. Japan's jobless rate unexpectedly fell to 4.7 percent in February. Still, that's just below a record high 4.9 percent in December and January. While the economy grew 0.8 percent in the threemonths ended on December 31 led by business spending, a decline of a 0.6 percent inconsumer spending, which accounts for about 60 percent of the economy, was a drag on growth. ``While rising bankruptcies have impacted the jobs market, it has yet to register significantly onconsumer confidence,'' said Poggi. Still, ``this could soon change.''