Many Japanese companies had hardly finished announcing their dismal earnings results in March when a new economic threat began to emerge — a flu epidemic that would strike the nation with alarming speed.

The number of confirmed swine flu cases has exploded a week since the first case was discovered at Narita International Airport, so far sickening mostly students or those predisposed to illness.

The speed with which the virus has spread has shocked the public, which is buying up face masks at a swift pace in the belief they will offer some protection from the flu.

While the new H1N1 flu is considered less virulent than other recent contagions, such as bird flu and SARS, some experts say it could nevertheless have a damaging impact on the economy, especially at a time when positive data and stimulus measures are beginning to lift consumer sentiment.

In a report released in late April, Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities Co., estimated that the spread of the new influenza overseas will reduce real gross domestic product in the April-June quarter by 0.4 percent.

The impact could be larger if consumption in leisure and service areas declines and if factories briefly suspend production as they did during the SARS outbreak in 2003, Shikano said.

All Nippon Airways said Monday there have been 5,070 cancellations for international flights since April 27. It said 179 of the cancellations occurred Saturday and 132 Sunday. The regions affected were mostly North America, Europe and China. Rival Japan Airlines did not provide specific figures.

“It’s not so much that the cancellations are huge, but reservations are dropping,” company spokesman Rob Henderson said, adding that domestic and overseas school trips have also been canceled.

“We’re hoping (the flu problem) won’t go as far as the summer,” he said.

Companies like Shiseido Co. and Mitsubishi Heavy Industries Ltd. have called on employees to refrain from taking unnecessary domestic trips and overseas business trips.

“If the movement of people is restrained, money flows will also be affected, so there will be a negative impact on the economy, centering on the Kansai region,” Mitsuru Saito, chief economist at Tokai Tokyo Securities Co., said.

Saito said the financial markets are experiencing selling pressure amid fears the new flu’s rapid spread will ravage the travel and leisure markets this summer and dampen spending during the yearend shopping season if the virus mutates into a more deadly disease in autumn.

The Ministry of Economy, Trade and Industry has begun to think about support measures for smaller companies, such as government-backed loans and other aid programs, to deal with the virus, vice minister Harufumi Mochizuki said.

The domestic outbreak comes at a time when economic sentiment is beginning to rise and auto and electronics makers have signaled that production cuts are bottoming out.

Consumer sentiment hit its highest in April since last June. Sources have said the Bank of Japan is considering upgrading its economic assessment for the first time in almost three years.

But company executives like Panasonic Corp. President Fumio Otsubo have cited the potential threat posed by the influenza strain as one reason why a strong recovery in fiscal 2009 is unlikely.

“We can’t hold high expectations with influenza, financial and auto woes still present,” Otsubo said after the company projected a hefty group net loss of ¥195 billion for the current business year.

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