Tough times for Japanese pubs as izakaya bankruptcies come at highest rate in more than a decade

In Japan, you’ll come across a couple of different sub-classifications of restaurants. There are senmonten, “specialized shops” that focus on variations of a single dish, like beef bowls or ramen. There are teishokuya, which serve a variety of set meals with a main dish accompanied by rice, vegetables, and miso soup. And then there are izakaya, pubs that offer a wide array of alcoholic beverages and sides such as skewers of grilled chicken, plates of sashimi, and bowls of edamame.

Because of the extensive variety of their offerings and how easily sharable their food is, izakaya are a popular choice for a couple of cold ones and a bite to eat…but the results of a recent study by Japan’s Teikoku Databank research firm shows that izakaya are in a shaky spot these days, with 2024 on pace for the largest number of izakaya bankruptcies in more than a decade.

According to Teikoku Databank’s findings, through November of this year 203 izakaya have declared bankruptcy (defined in the study as declarable with debts of over 10 million yen). That’s higher than any January-November period in the past 15 years, and up 7 percent compared to 2023. What’s more, no year between 2010 and 2023 had more than 204 izakaya bankruptcies for the entire year, so once this December’s numbers are added in to the 2024 total, it’s almost certain to set a new record.

▼ The study’s figures, showing izakaya bankruptcies between 2010 and 2024 for the first 11 months of the year in blue, and for the entire year in gray.
 

Obviously, there was a spike in izakaya bankruptcies during the pandemic, with 189 in 2020. But while bankruptcies dipped in the latter half of the health crisis, a massive jump occurred in 2023 with 204, more than in any single year of the pandemic, and things are going to be bleaker still in 2024.

So what’s going on here? Teikoku Databank cites changes in consumer spending habits, as well as rising costs for alcoholic beverages, food, and labor, and those factors are likely feeding into one another in a vicious cycle.

Starting with the first part, izakaya have long benefited from having large groups of customers come in for company drinking parties, as well as smaller groups of coworkers stopping in for an informal round or two on their way home from the office. That practice got put on hold during the pandemic as work-from-home and social distancing became the norm, and it hasn’t made a 100-percent comeback, with a lot of Japanese workers now more acutely aware that they’d rather spend their time doing something other than drinking with coworkers after clocking out as a result of being freed from such obligations for a few years.

Meanwhile, a weakened yen is resulting in all sorts of rising prices in Japan. With the country experiencing its worst inflation in a generation, restaurants have been steadily increasing their prices in order to protect their profit margins. However, it’s not just izakaya that are paying more for cooking ingredients, electricity, and delivery costs. Necessary living expenses like groceries, utilities, train fares, and gasoline are all rising for consumers too, and outpacing increases to workers’ wages.

In other words, izakaya are charging higher prices while potential customers have less money to spend, which is coinciding with an increased number of people having recently confirmed that they’d be OK with making fewer izakaya visits anyway. That’s not a very reliable recipe for financial success, and until some of the contributing factors change, the izakaya bankruptcy situation might get worse before it gets better.