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ECONOMY

Japan emergency will intensify losses in struggling sectors

  • January 18, 2021
  • , Nikkei Asia , 5:02 a.m.
  • English Press

TOKIO MURAKAMI, Nikkei staff writer

 

TOKYO — The state of emergency declared throughout much of Japan is expected to widen losses by 40% from pre-emergency levels in three of the hardest-hit industries, weighing on companies that still have yet to recover from the previous decree last spring, a Nikkei analysis shows.

 

Nikkei looked at 104 publicly listed enterprises in the restaurant, rail and air transportation industries, which suffered especially steep earnings declines during the first state of emergency. Each company was asked about the impact of a monthlong state of emergency, based on their estimated break-even points.

 

Even if revenue declines only 70% as much this time around compared with last year’s nationwide decree, these companies will see estimated monthly losses totaling more than 230 billion yen, or $2.2 billion. If revenue falls as much as it did previously, this figure would swell to about 380 billion yen.

 

These companies had reported total operating losses averaging 320 billion yen, or $3.1 billion, each month during the three months through June, which narrowed by about half the following quarter.

 

Though foot traffic is not expected to drop off in the 11 prefectures covered by the emergency — including the greater Tokyo and Osaka areas — as severely as in the spring, it is still expected to take a hit. As of last Tuesday, data including passenger volume on public transit showed a decline about 70% as large as during the first decree, according to Google.

 

The decline in demand “won’t be as severe as in April and May,” when passenger volume plummeted 90% compared with before the coronavirus pandemic, but “it will drop quite a bit in the second half of January,” said Japan Airlines Chief Financial Officer Hideki Kikuyama.

 

If revenue falls by 70% as much as in the spring, the 83 companies examined in the restaurant industry would likely see losses totaling about 20 billion yen. Many of these businesses are small and would be especially hard hit by a fall in sales.

 

The biggest impact in the sector would be on pubs, with estimated losses of 12 billion yen.

 

Watami, a large pub operator, would be “in the red by 500 million yen to 600 million yen” in the event of a monthlong state of emergency, Chairman Miki Watanabe told a news conference this month. The company has closed 83 directly operated locations in greater Tokyo.

 

Saizeriya, which runs a chain of affordable Italian eateries, has shortened operating hours at more than half its restaurants in Japan.

 

Losses at the 18 rail companies and three air transportation companies surveyed would total nearly 150 billion yen and more than 66 billion yen, respectively. Domestic passenger traffic is expected to come in about 70% below pre-coronavirus levels.

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