More than 20 listed firms have gone bust this year

The number of Japanese firms going bust has fallen for the second month in a row, encouraging hopes that the country's long slump may finally be bottoming out.

According to private research firm Teikoku Databank, June saw 1,415 bankruptcies, a fall of 9.5% on the same month last year and a 17-month low.

>The news comes just 24 hours after the government upgraded its forecasts for the economy for the fourth time since March. Corporate confidence is also back on the rise.

But the rising value of the yen could still choke off recovery by hobbling big exporters such as Sony and Nissan, while rising unemployment and the wave of corporate scandal washing over the US also spell trouble.

Post-War record

The bankruptcy figures are not all good news either, especially since comparisons are flattered by the high number of firms going bust between January and April.

The end of the financial year in March led to banks and other lenders pulling the plug on thousands of companies so as to improve their own performance.

Factors such as falling share prices and the rising yen are likely to nip the very slight economic recovery in the bud

Teikoku Databank

All in all, these companies went bust leaving debts of 7.44 trillion yen ($63.7bn; �41.1bn), and more than three quarters of them blamed their failure on the state of the economy rather than factors intrinsic to their own performance.

Drop in the ocean

And Teikoku Databank itself believes things will get worse again.

"Factors such as falling share prices and the rising yen are likely to nip the very slight economic recovery in the bud," it said in a statement.

"It seems that corporate results will worsen going forward."

Despite this pessimism, many Japanese companies - those that are still going, of course - are themselves more bullish.

The quarterly "tankan" survey of confidence among corporations, carried out by the Bank of Japan, rose in June at its fastest rate ever.

And June orders for machinery - a somewhat volatile but still well-regarded measure of investment over the following six to nine months - edged up too, confounding expectations of a return to decline after a surge the month before.

The old guard returns

But even if companies may be feeling a little better, the political situation does not bode well for the kind of radical shakeup that Japan is still widely considered to need.

Bankruptcies are generally seen as necessary in a corporate sector with immense debts run up in the boom years of the 1980s, propped up by over-generous banks and sweetheart deals between companies with cross-shareholdings.

The banks are now struggling to write off the bad debts, while the public sector is also deep in the red after years of failed "stimulus packages" which mostly put money into the politically sensitive and widely corrupt construction industry.

And yet Prime Minister Junichiro Koizumi, seen by some as a potential "new broom" reformer after a decade of dithering, has been weakened by scandal after scandal, and the powers behind the throne in his squabbling ruling party are re-asserting their control.

The result is likely to be corporate tax cuts which the country can ill afford.