The economy is showing signs of recovery

Teikoku Databank said during the month corporate bankruptcies fell 18.7 % from a year earlier, to 1,387.

Credit researchers Teikoku said the trend was due to government-funded help, rather than economic recovery.

Special government lending programs and credit guarantees are helping to prevent struggling small and mid-sized companies from collapsing, it said.

"But the severe business conditions, under which corporate profits are on a downtrend, has not improved, and the realisation of bankruptcies among small- and medium-sized companies has been only postponed by government aid," it said.

Poor sales

Debts owed by companies that went bankrupt in October came to 851 bn yen, down 55.8 % from a year earlier.

The figures cover companies which failed owing 10 mn yen or more.

Teikoku said business conditions remain harsh, with three-quarters of bankruptcies caused by recession-linked factors, such as poor sales or swelling bad loans.

Only one listed company collapsed in October - Morimoto Corporation, a construction company listed on the Osaka Stock Exchange.

Bankruptcies in the construction sector declined 19.7% contributing to the overall fall in October.

Overseas trade

On Friday it was announced that Japan's battered economy had grown for the seventh quarter in a row thanks to continued demand for Japanese goods in China and the US.

For the three months to September, GDP was up 0.6% from the previous quarter, making an annual rate of 2.2%.

Economists said that domestic spending was also climbing, albeit at a slower rate than the impact of overseas trade.