Japanese Idol App Firm Collapses Amid Wave of Bankruptcies

A Japanese company known for a game app based around virtual teen idols filed for bankruptcy, the latest in a wave of corporate failures that climbed to the most in 12 years as inflation and worker shortages hit weaker firms.

Tokyo-based ODD No. Inc. began bankruptcy proceedings this month, according to law firm Iinuma & Partners, which is serving as its trustee. The company, mainly known for its interactive animation game app Link! Like! Lovelive!, had ¥10.7 billion ($67.2 million) in liabilities, according to Tokyo Shoko Research Ltd. That made it one of the biggest bankruptcies in Japan so far this year in terms of money owed, data from the market research firm showed.

Closely held ODD No. attracted a “considerable” number of users for its app, but heavy development costs prevented the company from becoming profitable, Tokyo Shoko said in a report dated Aug. 13. Representatives of the company weren’t immediately available to comment.

Even as Japanese share indexes reach record highs on the back of swelling corporate profits, bankruptcies have also been on the rise, especially among smaller firms. That’s a result of factors such as higher material costs due to inflation, and labor shortages triggered by a decreasing population. Corporate failures in the first half of this year rose 7% from a year earlier to 5,346, the most cases since 2013, Tokyo Shoko data show.

The vast majority of failures have been at companies that had less than ¥100 million in liabilities, making up about 77% of the total in the first half, according to the data. Information service firms like ODD No. saw an especially sharp increase in bankruptcies, going up 18.5% from a year earlier to 166 cases, due to the small size of many of the firms, and intensifying competition from companies in an industry that’s rapidly changing due to AI’s soaring influence.

Read more: Japan Payment Processor Collapse Hits Banks, Restaurants

Last month’s collapse of Zentoshin Co., an Osaka-based credit card payment processor, sent shockwaves through regional banks as well as the restaurants that relied on its services.

“We’re expecting bankruptcies to stay high,” said Hiroki Sakurai, a researcher at Tokyo Shoko, citing the persistence of factors such as worker shortages and rising consumer prices.