The number of Japanese corporate bankruptcies rose for theninth month, climbing 21.4 percent year-on-year to 1,617 cases in July, Teikoku Databank said in a monthly report.

Debt of firms that went bust more than tripled from a yearearlier to 4.26 trillion yen ($39.21 billion) in July, due mainly to department store chain Sogo Co Ltd - which last month became Japan's second biggest corporate bankruptcy, owing 1.87 trillion yen.

Last Friday, the BOJ raised its key overnight call rate by 25basis points to 0.25 percent, a first rate hike in a decade and ending an 18-month policy of guiding rates towards zero. That is expected to raise the interest burden on firms stillsaddled with massive debts, a move analysts said could lead to more bankruptcies in coming months.

"It's possible we could see corporate bankruptcy data hittinganother record this year," said Takakazu Nakamori, a senior researcher at Teikoku Databank. .

"The BOJ action was not a surprise. But banks set to mergeare under pressure to pull the plug on troubled firms...and rising rates could be used as an excuse."

That is bad news for troubled builders such as Hazama Corpand Kumagai Gumi Co, saddled with hefty losses from the collapse of Japan's bubble economy a decade ago and struggling to restructure. Credit rating agency Standard & Poor's Corp (S&P) Estimatedlast week the average return on operating assets for Japan's top five builders was an extremely weak 1.9 percent, barely above the cost of financing investments or refinancing existing debt.

"Even assuming that constructors will continue to besupported by Japan's generous fiscal spending packages, mounting financing costs may overwhelm them," S&P Said in a report.

Teikoku's Nakamori agreed there was no guarantee constructorswould survive even if creditors agreed to waive debt. Three Hazama creditors are in talks over a requested 110billion yen debt waiver. Dai-Ichi Kangyo Bank, Hazama's biggest creditor, said last week that U.S.-Backed Shinsei Bank may forgive some loans.

-- (Reuters)