Japan’s Gastronomic Paradox: Booming tourism yet skyrocketing restaurant bankruptcies
Contrary to the rise of tourism, Japan is facing a record number of bankruptcies in the restaurant industry. What is going on?
Japan’s bustling streets are seeing a surge in tourists and locals alike eager to indulge in the country's culinary delights. Yet beneath the surface of this apparent prosperity, a record number of restaurants are shutting their doors for good.
While international visitors are cashing in on the low yen, enjoying more bang for their buck, Teikoku Data Bank's latest figures throw this stark contradiction into relief, with a staggering 30% rise in bankruptcies year-on-year, amounting to 8,881 cases. The question is, what’s behind this worrying trend?
The surge to nearly 9,000 restaurant bankruptcies is alarming, with debts rising to over 2 trillion yen. It’s not just restaurants feeling the heat—across seven industries and all regions, the numbers have climbed. However, labor intensive industries have seen a particularly steep increase, alongside those attributed to succession challenges and inflation-induced pressures, and sadly, the restaurant sector is the most vulnerable to both. With Japan’s population shrinking while inflation is picking up, more and more restaurants are facing an existential threat.
As 2024 so far has only sped up inflation in Japan, the figures from the first quarter loom ominously, suggesting that we might breach the 10,000-mark in annual bankruptcies—a threshold never before crossed but now alarmingly within reach.
Drilling down into the specifics, the bankruptcies in the restaurant sector are largely driven by traditional izakayas and Chinese food outlets, including beloved ramen shops, with many owners holding firm on pricing despite the financial strain.
Due to over 30 years of deflation, Japanese customers have come to view price rises as greedy; and to not be shamed, many ramen shop owners are choosing to close down their shop over raising their ramen bowl prices over the taboo ridden 1000 yen mark…
Looking forward, the risk of rising interest rates loans looms large on the horizon, as many restaurants are surviving on basically free loans due to Japan’s sub-zero interest rate environment. Any interest rate hike from the Bank of Japan could have devastating consequences on the restaurant industry, with night spots already straining to staff their late shifts and grappling with wage pressures.
As we chew over these sobering statistics, it’s clear that Japan’s restaurant industry is at a crossroads, navigating a complex landscape of cultural expectations, economic headwinds, and a hospitality tradition that’s as much a part of its identity as cherry blossoms in spring. The coming months will be telling—will the restaurants adapt their pricing strategies, or will the culinary closures continue?
Glad that I read your piece on a full stomach! Just kidding. Are there any bright spots (e.g., kaiten sushi chains) that are holding their own in the midst of this challenging environment? If so, why?
An interesting write-up. Thank you. I was meaning to reply to your message re: where I find a stock to write about. I just read some publications such as Nikkei. During the reporting season, which we are in now, i keep an eye out on the companies which report good results. How about you? where do you find a topic to write on? Sorry for asking a question in the comment section.