Business / Economy

Japanese firms preparing for prolonged economic hit from coronavirus outbreak

JIJI

Japanese companies that do business in China are starting to consider measures to cope with the possibility of a prolonged coronavirus outbreak.

The spread of the new strain of coronavirus, originating in the Chinese city of Wuhan, has limited the movement of goods and people in the country while forcing plants there to remain closed.

Many Japanese manufacturers have decided to extend the closures of their plants in China by about a week until Feb. 9, beyond the end of the Lunar New Year holiday on Sunday, following instructions from Chinese authorities.

The extended suspensions of operations are unlikely to severely impact the companies if they can reopen their plants by the new date, as many of the plants have certain levels of parts inventories. However, the spread of the new coronavirus seems to be intensifying, casting doubt on whether the plants can be restarted soon.

“We don’t know whether we can immediately reopen,” a Sumitomo Chemical Co. official said.

In light of potential supply chain issues from prolonged suspensions, officials of auto parts makers Aisin Seiki Co. and Toyota Boshoku Corp. said Friday that they are considering the possibility of temporarily relocating their production in China to Japan, Thailand and other areas. The Toyota Motor Corp. affiliates produce parts including automatic transmissions and car seats in China.

Airlines operating routes connecting Japan and China are also responding to the change in the business environment caused by the coronavirus outbreak.

All Nippon Airways President Yuji Hirako said Friday that the company has no choice but to consider suspending some of its China flights as the number of reservations for flights from the country in February has halved from the year before. The airline has already suspended its route between Wuhan and Narita International Airport near Tokyo.

Hideki Kikuyama, Japan Airlines senior managing executive officer, said the same day that “we need to consider suspending or reducing our flight services to and from China” if demand falls.

Retailers are facing difficulties from the coronavirus outbreak as well.

On Friday, department store operator Isetan Mitsukoshi Holdings Ltd. revised down its consolidated sales forecast for the fiscal year ending in March by ¥35 billion to ¥1.155 trillion.

The bleaker estimate reflects shortened opening hours at outlets in China and sluggish sales to Chinese tourists at stores in Japan, in addition to slow demand at home following the consumption tax hike last October.

“We can’t predict how things will be from March,” Isetan Mitsukoshi Executive Officer Akira Kinbara said.

The World Health Organization on Thursday declared that the new coronavirus outbreak is a global public health emergency.

The United States expanded its travel warning for the whole of China on the day although the WHO stopped short of advising that travel to and trade with areas affected by the coronavirus outbreak be suspended.

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