Business

Coronavirus took toll on Japan's auto and retail sales in February

Kyodo, JIJI

Automakers and department store operators reported sharp sales declines in February as the spread of the new coronavirus dented consumer sentiment and drove away foreign tourists.

The weak data came as analysts warned of a second consecutive quarter of contraction in January to March, with Japan on the brink of recession since the consumption tax hike in October.

Sales of new automobiles, including trucks and buses, dropped 10.3 percent in February from a year earlier to 430,185 units, marking the fifth straight month of decline.

The sluggish sales can be attributed to the coronavirus outbreak and lingering effects from the Oct. 1 consumption tax rate hike, the Japan Automobile Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association said Monday.

Some dealers saw a decrease in customer numbers as many people refrained from going out amid growing fears over COVID-19.

Excluding minivehicles, sales of new autos fell 10.7 percent to 268,302 units. Sales of minivehicles, with engine displacements of up to 660 cc, dropped 9.6 percent to 161,883 units.

All eight major automakers recorded lower sales.

Five saw double-digit decreases. Mitsubishi Motors Corp. suffered a plunge of 24.5 percent, while Nissan Motor Co. saw a drop of 13.8 percent.

Sales fell 7.0 percent for industry leader Toyota Motor Corp.

Meanwhile, four major department store operators saw sales decrease in February, hit by a drop in tax-free sales due to a sharp fall in foreign tourists visiting their stores.

Sales at J. Front Retailing Co., operator of the Daimaru and Matsuzakaya department stores, dropped 21.4 percent from a year earlier, while Isetan Mitsukoshi Holdings Ltd. saw a fall of 13.6 percent.

The economy is facing a hit close to or even worse than that suffered in 2011, when it contracted 0.1 percent due to the massive earthquake and tsunami in the Tohoku region.

Preliminary government data have shown that gross domestic product shrank 1.6 percent in the October-December quarter for an annualized contraction of 6.3 percent, the sharpest fall in 5½ years.

In a report Tuesday, Goldman Sachs downgraded its economic estimate for Japan in the January-March quarter, forecasting an annualized contraction of 0.3 percent, compared with a previously projected expansion of 0.3 percent.

The increased risk to the economy is pressuring the Bank of Japan to implement new support measures, some analysts said.

Supply chain disruptions in the manufacturing sector will show up more clearly in upcoming economic data, while the coronavirus outbreak in China, if prolonged, could dent demand for 5G telecommunication products and derail a recovery in IT equipment output, Barclays Japan said in a recent report.

BOJ Gov. Haruhiko Kuroda issued a statement Monday pledging that the central bank “will strive to provide ample liquidity and ensure stability in financial markets through appropriate market operations and asset purchases.”

Coronavirus fears have dealt a particularly heavy blow to the tourism sector since China banned all group travel to other nations in late January.

A Japan Ryokan & Hotel Association survey showed Monday that the number of reservations at around 400 facilities in 37 prefectures from March to May totaled 1.55 million, down 45.2 percent from the same period a year earlier.

The association’s data reflect reservations made by Feb. 25, the day before Prime Minister Shinzo Abe asked organizers to cancel or postpone big events for two weeks through March 10 to prevent further spread of the virus.

The request led to the closure of theme parks, stadiums and other cultural venues and tourist spots that attract large crowds.

Major travel agency H.I.S Co. on Monday cut its earnings outlook, expecting the impact of the health scare on its businesses to continue until at least July.

It now expects a net loss of ¥1.1 billion for the business year through October, sharply down from a profit of ¥11 billion estimated earlier.

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