Research Briefing | Aug 16, 2021

Japan’s growing debt overhang adds to zombie threat

Japan | Growing debt overhang adds to zombie threat

Business failures in Japan have been stemmed thanks to massive government and bank liquidity support. However, there’s mounting concern regarding debt overhang: A survey of small firms shows that 34% find their debt excessive and that 14% already had excessive debt prior to the pandemic.

What you will learn:

  • Some evidence of debt overhang and a rise in zombie firms.
  • Relatively healthy small firms will voluntarily close business.
  • Debt-overhang and zombies will weigh on bank profitability and productivity.

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