Founded in 1858, Japanese sesame oil maker Kadoya Sesame Mills has witnessed the country transform over generations — surviving world wars and Japan's asset bubble.

Now, more than two decades after listing on the Jasdaq Securities Exchange in 2004, Kadoya is set to go private through a tender offer backed by Japanese private equity firm Integral. The move comes as the company navigates rising raw-material costs and heightened geopolitical risks.

Japan's long-established businesses are being tested by factors ranging from a shrinking domestic market and labor shortages to succession challenges, experts told CNBC. Bankruptcies among Japanese businesses with more than 100 years of history are occurring at a record pace, reaching 112 in the first eight months of 2026, according to Teikoku Databank.

Japan's century-old companies have achieved enduring prosperity through a long-term perspective fostered by family ownership, strong roots in local communities and a business approach that stays within their means, said Shigeto Nagai, head of Japan economics at Oxford Economics.

Their long histories and years of capital accumulation have also left them with sound balance sheets and stable profit margins.

"However, they are increasingly concerned that they cannot foresee a future of sustained high profits over the long term and fear they will gradually fall into decline," Nagai said.

Rising costs, shrinking market

Rising costs and labor shortages have become major challenges for Japanese companies in the post-pandemic business environment, said Harumi Taguchi, principal economist at S&P Global Market Intelligence.

"Although inflation has made it easier for companies to pass on costs than during the deflationary period, many still cannot fully reflect higher expenses in sales prices," Taguchi pointed out.

Higher costs are particularly difficult for smaller and domestically focused Japanese businesses to absorb given their weaker sales bases, she said. Pricing power is therefore a key factor in determining which companies can adapt.

Bankruptcies linked to higher prices jumped 23.8% to 556 in the first half of 2026, while labor-shortage bankruptcies climbed 12.4% to 227, according to Teikoku Databank.

Sube Shoten, a tofu maker founded in 1877 during Japan's Meiji era, reportedly ceased operations in May and began preparing to file for bankruptcy as low profit margins and a recent surge in raw-material costs clouded its business outlook.

Another major challenge is intensifying domestic competition and labor shortages as Japan's birth rate declines and its population ages, Nagai said.

Expanding overseas is another challenge as the domestic market, historically a stable source of revenue, continues to shrink. But there is no "one-size-fits-all" prescription, Nagai added.

Succession and ownership

Succession is another growing challenge. Bankruptcies linked to a lack of successors rose 16.9% to 312 from a year earlier in the first half of 2026, according to Teikoku Databank.

A weaker yen, corporate governance reforms, activist pressure and succession challenges among founder-owned businesses are pushing owners and boards to reassess their options, alongside broader pressures including inflation, tariffs, labor costs and interest rates, said Paul Aversano, managing director and global practice leader of Alvarez & Marsal's Global Transaction Advisory Group.

"It is that combination, rather than any single issue, that is shaping decisions," he said.