The outbreak of the new coronavirus is expected to cut spending by foreign travelers to Japan by ¥981.3 billion ($9 billion), a private research firm said in a new report, raising its earlier estimate of a fall of ¥624.4 billion.
Resona Research Institute amended its forecast as it now expects the virus impact on inbound spending from February to be prolonged by one month through June. Its rapid spread, now across about 120 countries, has prompted curbs on travel and led the government to impose tighter border controls for Japan.
The institute estimated for the period between February and June that sales at department stores and drugstores, popular especially among Chinese visitors for duty-free products, will decrease by ¥397.6 billion. Revenues at hotels and inns are projected to shrink by ¥259.6 billion.
The dining and transportation sectors will also be hit by falls of ¥197.7 billion and ¥90.5 billion, respectively, it said in a report last Wednesday.
Japan earlier this month restricted entry of visitors from China, the original epicenter of the viral outbreak, and South Korea, dealing a further blow to sectors that depend heavily on spending by the Asian neighbors.
“We made the latest assumption based on the premise that the global spread of the (coronavirus) will be contained by around May, but it is totally unpredictable,” said Hideyuki Araki, an analyst at Resona Research.
The falls in inbound spending will come on top of a decrease in domestic consumption as people shun crowds and opt to stay indoors.
Prime Minister Shinzo Abe has requested that big sports and cultural events be canceled or postponed, and the large majority of organizers have complied with his request.
“When deteriorated profitability at companies is added, the possibility of the country entering a recession will rise steeply,” Araki said, warning also of increases in bankruptcies among small and midsize companies.
In the Kansai region alone, Resona Research said that spending by foreign travelers will decrease by ¥304.2 billion, amended from the ¥190.5 billion it forecast on Feb. 13.