Japan’s Labor Shortage Bankruptcies Surge in 2025 — Which Industries Are Failing and Why

◆ Summary: Profitable Companies Are Still Shutting Down — Because No One Is Left to Work

In 2025, a silent but serious economic phenomenon is unfolding in Japan: a record-breaking surge in bankruptcies due to labor shortages.

These are not companies that failed because of falling profits or massive debt. Many were stable, even profitable. But they closed their doors simply because they could not find—or keep—workers.

From construction and logistics, to elderly care and software development, companies across sectors are hitting a breaking point:

“We have machines. We have contracts. But we have no people.”

This article explores the industries hit hardest, the emotional stories behind the numbers, and what this trend reveals about labor systems not just in Japan—but globally.

◆ Background: The Fast-Rising Curve of Labor Shortage Bankruptcies

According to Teikoku Databank, Japan saw 342 labor-shortage-related bankruptcies in 2024, a sharp 82.3% increase from the year before.
As of mid-2025, that trend is continuing, with 202 cases already recorded in the first half alone—a record pace.

Unlike financial insolvency or poor sales, these companies collapsed because they could no longer maintain their workforce.
Two types of triggers dominate:

• “No applications” bankruptcies — companies couldn’t hire anyone
• “Mass resignation” bankruptcies — core staff left, and operations collapsed

The implication is clear: in modern business, labor stability is as critical as cash flow.

◆ Who’s Being Hit the Hardest? The Most Affected Industries

Based on national data and expert reports, here are the industries experiencing the highest risk of labor-induced collapse:

🔨 Construction (54 cases in 2025 H1 — highest of all sectors)

• Workforce aging rapidly; fewer young recruits
• Even with rising wages, the physical toll and long hours deter applicants
• Public projects are increasing, but contractors are unable to take work due to staffing gaps

🚚 Logistics & Trucking (28 cases in 2025 H1)

• The “2024 problem”—new legal limits on driver hours—worsens existing shortages
• Companies can’t transport goods → revenue drops → fixed costs remain → collapse
• Subcontractors and SMEs are most vulnerable

🧓 Elder Care, Software Development, Temp Agencies

• Care facilities cannot retain staff; emotional burden + low wages cause high turnover
• Software firms lack junior engineers, especially in rural areas
• Temp staffing agencies see gaps between contracts and worker availability, breaking the balance

These industries are people-powered. Without consistent human capital, operations become unsustainable—even with strong demand.

◆ Real Voices From the Ground

🏭 Small-town paper manufacturer CEO (via Reuters):

“The machines are ready. The orders are there. But if no one is around to operate them, what good are they? We’re close to shutting down.”

Despite investing in automation, the company still needs skilled hands to manage operations.

🛒 Former supermarket executive (via note.com):

“Are we really going bankrupt because of labor shortage? Or is it because we failed to invest in hiring, training, and retention before it was too late?”

This voice challenges the narrative, suggesting some companies are blaming labor shortages to mask deeper management failures.

💬 Individual commentator (via note.com):

“Even if a company is profitable, it can still die. No staff. No replacements. No options. This isn’t someone else’s problem anymore.”

This emotional post reflects growing public anxiety—especially among small business owners—who fear the same fate.

◆ Why Aren’t People Applying? Or Staying?

At first glance, Japan’s labor shortage crisis seems simple: there just aren’t enough workers.

But dig deeper, and a more complex truth emerges. The problem isn’t just about numbers—it’s about systems that fail to attract, train, and retain talent.

Here are the structural factors fueling this crisis:

🔹 1. Outdated Hiring Channels

• Many SMEs still rely on paper-based job ads or outdated platforms
• They miss younger job seekers who are active on social media or digital job boards
• Especially in rural areas, companies fail to meet candidates where they are

🔹 2. Low-Quality Work Environments

• Even with rising wages, poor working conditions, long hours, and lack of support drive people away
• Mental health risks and burnout are rarely addressed
• Job security and career growth are often unclear

🔹 3. Slow or Absent Digital Transformation (DX)

• Training is unstructured or non-existent
• Workflows are highly dependent on specific employees (no standardization)
• New hires feel lost, unsupported, and often leave within months

◆ Expert Analysis: Not a Hiring Problem—A “Why Work Here?” Problem

Labor shortages are often framed as a supply problem: not enough people.

But as noted by economist-turned-columnist Kobayashi Hisashi:

“If nobody applies, maybe the company isn’t worth applying to.”

In short, the true problem may be that many companies are simply no longer attractive employers—either in salary, culture, or future promise.

This shift is a wake-up call. Companies are no longer automatically “chosen” by job seekers. They must now compete to earn their labor.

◆ Action Steps: What Companies Can Do Today

To avoid labor-collapse bankruptcies, businesses—especially SMEs—need to rethink how they hire, retain, and empower people.

✅ Improve Visibility

• Use modern recruitment tools like Indeed, LinkedIn, and TikTok (yes, even for trades)
• Showcase company culture, not just pay rates

✅ Build Better Onboarding

• Develop simple manuals and role expectations
• Assign mentors, not just managers
• Allow for failure in early months—create a safe space to learn

✅ Invest in Retention

• Provide emotional support, flexible scheduling, and upskilling opportunities
• Create clear career pathways—even in small teams
• Regularly listen to employee feedback

◆ What This Crisis Really Tells Us

Japan’s wave of labor-shortage bankruptcies is not just an HR problem. It’s a sign of deeper misalignment:

• Businesses designed for an era when workers were plentiful and obedient
• Workers now seeking value, meaning, and mental health—not just a paycheck
• Societies that have not caught up with how labor relationships have changed

In this way, the crisis is universal, not just Japanese.
It’s a preview of what many countries may face as aging, automation, and labor preferences collide.

◆ Final Thought: The Companies That Will Survive

The businesses that will endure aren’t just the ones with capital or demand.
They’re the ones that can answer this question clearly:

“Why should someone choose to work here?”

If you can answer that—not just on a job ad, but in your daily operations—you may never face a labor shortage at all.

🔗 References:

• Teikoku Databank: 2025 H1 Labor Shortage Bankruptcies
• Teikoku Databank: Retirement-Triggered Closures
• Reuters: CEO of Small Paper Factory Interview
• note.com: Kobayashi Hisashi (Former Supermarket CEO)
• note.com: Personal Commentary on 202 Cases
• Smartmat: Industry-wise Labor Shortage Breakdown