If you enjoy anime, Japanese cinema, or have had the opportunity to visit Tokyo or any other city in Japan, you’re probably familiar with izakayas. While the name may not immediately ring a bell, their appearance will surely do. Izakayas are traditional bars where people come together to drink beer or sake with colleagues while savoring chicken skewers, plates of sashimi, and bowls of edamame. They represent one of the most iconic sights of Japanese cuisine.
However, tradition doesn’t always guarantee success. Despite their emblematic status, izakayas are currently going through tough times. These Japanese bars are experiencing the highest levels of bankruptcy in over a decade, and many remaining establishments are also reporting economic difficulties.
Longstanding history, uncertain future. Every city has a unique urban landscape filled with unmistakable symbols, and in Japan, izakayas are among those iconic elements. There are a wide variety of izakayas, including robatayaki, yakitori-ya, and oden-ya. Each specializes in a different style of food preparation.
Unfortunately, the longstanding history and deep-rooted nature of izakayas haven’t protected them from closure. 2023 had 204 izakaya bankruptcies, and from January to November 2024, 203 more were recorded. This trend implies that it may have been the most challenging year since at least 2010.
Exceeding COVID-19 figures. Data collected by Japanese financial services provider Teikoku Databank reveals an alarming trend. Between January and November 2024, 203 izakayas filed for bankruptcy, accumulating debts exceeding $64,000. This figure marks the highest count for that period since at least 2010, when 115 bankruptcies were recorded from January to November.
As such, the bankruptcy total as of Nov. 30, 2024, closely matched that for the entire fiscal year of 2023, suggesting that the final tally for 2024 is likely to be even higher. Additionally, the bankruptcies reported in 2023 and 2024 far surpass those recorded in 2020, a year heavily impacted by the COVID-19 pandemic, during which 189 izakayas went out of business.
Are all businesses affected equally? No. Family-owned establishments are suffering the most. According to Japanese newspaper The Mainichi, 100 of the 203 izakayas that went bankrupt between January and November 2024 had capital of less than $6,400, while another 86 had capital ranging from $6,400 to $64,000.
These statistics suggest that not all izakayas are experiencing the same level of distress. The Mainichi also points out a “clear gap” between small independent stores and those operated by chains. For example, the large izakaya chain Watami Co. has reported a notable improvement, with bookings for the December holidays being 10-20% higher in 2024 than in 2023.
“Survival of the fittest.” Teikoku Databank concludes, “Medium, small and micro-size businesses have limited options for countermeasures, and the current situation is accelerating the survival of the fittest within the izakaya industry, which was hard to see during the pandemic.” However, there are two concerning indicators for the sector.
The economic weight of the izakaya market appears to have declined significantly in a short time. At the end of last year, the market was estimated to reach $10.6 billion, a welcome rise from the $5.68 billion it plummeted to in 2021 during the pandemic. However, this figure still falls short of the levels seen before the onset of COVID-19. In fiscal 2017, the market size was approximately $12.1 billion.
The outlook is also bleak. About 40% of izakaya managers reported facing financial struggles during fiscal 2023, raising concerns that more businesses may be heading toward bankruptcy.
What are the reasons? Several factors contribute to the challenges izakayas face. Some are general economic issues, including Japan’s demographic shift, inflation, rising import costs due to a weak yen, the impact of the war in Ukraine on energy supply and costs, and increasing labor expenses. Other reasons refer specifically to the izakayas’ culture and business model.
Izakayas aren’t the only type of restaurant in Japan experiencing these challenges. Ramen restaurants are also facing tough times, with more than 70 businesses declaring bankruptcy in 2024. This is 30% more than the previous year. A significant hurdle for ramen restaurants is the reluctance of many restaurateurs to charge more than $6.40 for a bowl of noodle soup, as they fear that increasing the price could drive away their customers.
“A holdover of earlier times.” Izakayas are also facing challenges due to shifts in social habits and generational preferences. For many years, it was common for office colleagues to gather at these establishments for drinks after work or on their way home. However, this habit was disrupted during the pandemic and hasn’t returned with the same vigor. Additionally, Generation Z appears to be less interested in alcohol.
Robbie Swiennerton, a food critic for Japan Times, told The Guardian, “The izakaya is a holdover from earlier times, when the postwar baby boomer generation ruled the roost. These days, there are fewer younger people, and they don’t drink as much. And they don’t want to drink in the same places as their parents and grandparents. It’s the same with food.”
This new trend seems to impact small businesses the most due to changing priorities. Customers today seem to gather for just one round of drinks, prompting them to seek out different venues that offer more variety.
Image | Moon Angel | Yuya Tamai [1, 2]
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