The Bank of Japan cut its assessment of the nation’s nine regional economies in light of the damage caused to production, consumption and corporate finances by the coronavirus pandemic, with new emergency restrictions set to add to the pain.
The central bank’s all-region downgrade was the first since the 2008 global financial crisis, indicating the severity of the outbreak’s impact.
On a national level, some analysts are forecasting the economy will shrink more than 20 percent this quarter as partial shutdowns in some parts puts more downward pressure on growth.
While the central government has unleashed a record-breaking economic package to prop up the economy, pressure could still build on the BOJ to do more if conditions continue to deteriorate.
“The spreading novel coronavirus is having a serious impact on our economy,” BOJ Gov. Haruhiko Kuroda told his branch managers before the release of the Sakura report, the BOJ’s equivalent of the Federal Reserve’s Beige Book.
Kuroda cited across-the-board weakness in exports, tourism, consumer spending and factory production. “The economic outlook is extremely uncertain,” he added.
A respondent to the BOJ’s survey of regional conditions who works at a Kyoto hotel said visitors to the city are way down, adding that the pandemic is hitting tourism harder than the global financial crisis did, the person said.
The BOJ’s Osaka branch manager, Yasuhiro Yamada, concurred, saying the flow of tourists is at a standstill.
A respondent at a machinery maker on Kyushu said business was being hampered by trouble in the supply chain. The flow of parts from China still hasn’t recovered even though factories on the mainland are getting back to work, the respondent said.
The situation could get much worse over the coming weeks because the government’s emergency declaration allows local authorities to call on people to stay home and businesses to close.
Responding to a recent jump in s infection numbers, Prime Minister Shinzo Abe declared a state of emergency for Tokyo, Osaka and five prefectures that together generate half of Japan’s economic output.
On Thursday, the governor of Aichi, home to Toyota Motor Corp., called on Abe to add his prefecture to the list, citing increasing infections there. The governor also said Aichi would declare its own state of emergency on Friday.
Unlike service-oriented Tokyo, roughly 40 percent of Aichi’s output comes from manufacturing. It also ships manufacturing products worth ¥46 trillion ($422 billion), which accounts for 15% of Japan’s total and is more than any other prefecture, according to government data.
Since conditions are already severe in central Japan, they will get worse in Aichi if an emergency is declared, said Tokiko Shimizu, manager of the BOJ’s Nagoya branch.
The BOJ will next meet from April 27 to 28 to update its quarterly economic projections. The forecasts are likely to be dire unless the BOJ skips them as the Fed did last month.
Your news needs your support
Since the early stages of the COVID-19 crisis, The Japan Times has been providing free access to crucial news on the impact of the novel coronavirus as well as practical information about how to cope with the pandemic. Please consider subscribing today so we can continue offering you up-to-date, in-depth news about Japan.