The number of corporate bankruptcies with debts of at least ¥10 million in Japan in August dropped 4.8% from a year earlier to 723, down for the first time in two years and five months, Tokyo Shoko Research data have shown.

The figure stood below 800 for the first time in four months, according to the data, released Monday. Growing moves by companies to pass on higher costs reflecting a rise in inflation are believed to have led to the decrease in bankruptcies.

But "there are lingering factors that can worsen corporate earnings, such as rises in prices, labor costs and interest rates," the research firm said, adding that the number of bankruptcies is expected to "follow an uptrend while repeating ups and downs."

Total liabilities left by failed companies in August stood at ¥101.3 billion, down 6.4% year on year and dropping for the first time in two months.

Many of the firms that went bust were small companies and micro businesses. Bankruptcies involving less than ¥100 million of liabilities accounted for more than 70% of the total cases.

By industry, the number of bankruptcies was the biggest in the service sector, at 242, up 1.6%. Bankruptcies were noticeable mainly among operators of eating and drinking establishments.

The construction industry had the second-largest number of bankruptcy cases, at 121, although the figure was down 22.9%. Bankruptcies decreased in the manufacturing, real estate and transport sectors.

Of the total cases, bankruptcies caused by difficulties passing on increased costs resulting from higher prices decreased about 20% to 46, the second-lowest monthly figure so far this year. However, the combined number of such bankruptcy cases in January-August stood at 490, up 16.6% from a year before.