Economy minister Yasutoshi Nishimura warned Tuesday that corporate profits and factory production could take a hit from the coronavirus outbreak in China that has rattled global markets and chilled confidence.
Asian stocks extended a global selloff as the outbreak in China, which has killed over 100 people and spread to many countries, fueled concern over damage to the world’s second-largest economy and an engine for global growth.
“There are concerns over the impact to the global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar New Year,” Nishimura told a news conference after a regularly scheduled Cabinet meeting.
“If the situation takes longer to subside, we’re concerned it could hurt Japanese exports, output and corporate profits via the impact on Chinese consumption and production,” he said.
China is Japan’s second-largest export destination and a huge market for its retailers. Chinese make up 30 percent of all tourists visiting Japan and accounted for nearly 40 percent of total spending by foreign tourists last year, according to an industry survey.
The outbreak could hit Japanese department stores, retailers and hotels, which count on an inflow of Chinese tourists during the Lunar New Year for a major sales boost.
Honda Motor Co., which has three plants in Wuhan, the capital of Hubei province and the epicenter of the outbreak, plans to evacuate some staff. Aeon is closing its shopping malls in the city until Thursday.
Major chipmaking equipment maker Tokyo Electron Ltd. will bring some 30 people back to Japan, while Nippon Steel Corp. will evacuate four employees and tire maker Bridgestone Corp. one worker.
Over 150 Japanese companies are believed to have business bases in Wuhan and the surrounding area. While some employees were able to leave before Chinese authorities cut off transportation to and from the area, many have been stranded there.
Economists at SMBC Nikko Securities estimate that if a ban imposed by China on overseas group tours lasts for six months, it could hurt Japan’s economic growth by 0.05 percent.
Some expect the potential damage to be much worse.
Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said the decline in tourists from China could hurt Japan’s GDP growth by up to 0.2 percent.
“The biggest worry is the risk that the negative impact from the outbreak persists and hits (the economy) during the Tokyo Olympic Games,” when a huge number of Chinese tourists are expected to visit in July and August, he said.
“If the number of visitors decreases, rather than increasing, the hit to Japan’s consumer industry will be quite large,” Kumano warned.
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