The recent extension of a state of emergency in response to the coronavirus pandemic will have a massive negative impact on the Japanese economy, according to economic observers who say that Japan’s gross domestic product is expected to fall sharply due to a decline in personal consumption stemming from the conditions of people staying home and the suspension of business.
Hideo Kumano, executive chief economist at Dai-ichi Life Research Institute Inc., forecasts that the monthlong extension of the state of emergency to the end of May will reduce the real GDP by ¥23.1 trillion, excluding the effects of price fluctuations. With the GDP for the month ending May 6 having already declined by ¥21.9 trillion, this would mean an estimated total decline of ¥45 trillion, which is equivalent to 8.4% of the annual real GDP.
“I expect that the type of the negative economic impact in the month following May 6 will significantly differ from that in the month ending May 6,” Kumano said.
Regarding such businesses as the restaurant industry, he said, “Fixed costs including labor and rent will threaten the survival of companies as the business suspension drags on.”
“Economic measures will be discussed from now on,” he said.
In April, the government has compiled an emergency economic package that includes distribution of ¥100,000 per person for relief.
Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities Co., said, “Additional spending of about ¥10 trillion will be needed to offset the downward trend in the growth rate.”
Yasuhide Yajima, chief economist at NLI Research Institute, said: “In most cases, companies will have to make up for the insufficiency [for rent and so on] by themselves, such as through business downsizing, asset sales, or financial support plans launched by the government and the Bank of Japan and so on. A prolonged battle against the virus would inevitably lead to an increase in bankruptcies.”
As for conditions from June, Takahide Kiuchi, executive economist at Nomura Research Institute Ltd., said: “It is unlikely that requests for voluntary restraint and suspension of business will be lifted all at once. Companies and individuals will continue to exercise self-restraint to avoid the spread of infection.”
Kikuchi predicts real GDP will continue to decline for four consecutive quarters, through July-September.