Challenges Facing Century-Old Japanese Businesses in 2026

As Japan grapples with rising temperatures that have reached unprecedented highs—over 40 degrees Celsius for the first time this year—its long-standing businesses also face rising challenges. Established companies, particularly those over a century old, are encountering obstacles due to economic shifts and changing market conditions.

Rising Costs and Market Contraction

Japanese companies, especially smaller domestic firms, are currently navigating a landscape marked by increasing raw material costs and a shrinking consumer market. According to Harumi Taguchi, principal economist at S&P Global Market Intelligence, while inflation has allowed businesses to more easily pass costs onto consumers than during the prior deflationary period, many still struggle to fully incorporate these costs into their pricing structures.

• Bankruptcies linked to higher prices saw a dramatic increase of 23.8%, totaling 556 in the first half of 2026.
• Labor shortages contributed to a 12.4% rise in bankruptcies, accounting for 227 cases.
• Subsequently, businesses like Sube Shoten, a tofu manufacturer established in 1877, ceased operations due to narrow profit margins exacerbated by escalating raw material prices.

Japan’s aging population and declining birth rate also contribute to these challenges, intensifying competition and putting pressure on labor availability.

Succession and Ownership Issues

Succession planning presents another significant hurdle for many venerable Japanese enterprises. Teikoku Databank reports a 16.9% increase in bankruptcies due to succession issues, rising to 312 cases in just the first half of 2026.

Factors such as a weaker yen, evolving corporate governance standards, and pressures from activist investors are prompting leaders of family-owned businesses to reevaluate their strategic options. Paul Aversano, managing director of Alvarez & Marsal’s Global Transaction Advisory Group, noted, “It is that combination, rather than any single issue, that is shaping decisions.”

The Path Ahead for Heritage Businesses

As companies like Kadoya Sesame Mills consider going private to navigate this challenging environment, the overarching concern remains: Can these century-old firms sustain profitability in the long run?

• These businesses have enjoyed solid profitability and robust balance sheets built over decades, but the ability to forecast long-term success now seems uncertain.
• Experts suggest that with the domestic market continually shrinking, exploring international markets could be essential, although it may not represent a universal solution for every business.

Amidst all these challenges, the future of Japan’s traditional companies hangs in the balance as they confront the realities of a new economic landscape. The resilience of these firms will ultimately depend on their adaptability and the strategies they devise for growth in an increasingly complex global economy.