Business | FOCUS

Japanese firms in unprecedented crisis due to coronavirus

JIJI

With the coronavirus ripping through the world, Japanese businesses in a wide range of industry sectors, most notably the aviation, retail and automobile industries, have plunged into an unprecedented crisis.

According to SMBC Nikko Securities Inc., the combined net profits of companies listed on the first section of the Tokyo Stock Exchange that closed their books in March plummeted 76 percent from a year earlier in January-March.

Many companies reported red ink, hit hard by disruptions in production and supply chains and the evaporation of demand stemming from stay-at-home requests and orders in many countries, which were introduced to battle the spread of the virus.

In response to a halt in the movement of people around the world, demand for both international and domestic flight services disappeared.

Japan Airlines logged a group net loss of ¥22.9 billion in the January to March period.

The pandemic is “a risk that we have never experienced before,” warned JAL Senior Managing Executive Officer Hideki Kikuyama.

Shin Kaneko, president of Central Japan Railway Co., or JR Tokai, which operates the Tokaido Shinkansen Line, noted that the number of customers using the company’s train services in early April was 10 percent of that of last year. “How long will the situation last?” he said.

Meanwhile, many department stores, whose earnings have been supported by robust buying by foreign visitors to Japan, have closed down following the government’s declaration of a state of emergency over the coronavirus in early April.

“If we continue to shut all of our stores, our operating profit will be pushed down by ¥15 billion every month,” Isetan Mitsukoshi Holdings Ltd. President Toshihiko Sugie said.

With demand unlikely to recover fully soon after the reopening of the stores, Sugie added, “We can’t avoid scaling down our stores in the long run.”

The coronavirus pandemic has delivered a strong blow to manufacturers as well.

At an online news conference on Tuesday, Akio Toyoda, president of Toyota Motor Corp., said that “the impact of the coronavirus shock is significantly larger than that of (the global financial crisis triggered by the collapse of U.S. investment firm Lehman Brothers in 2008).”

The leading automaker lowered its global vehicle sales forecast for fiscal 2020 to 8.9 million units, the first fall below 10 million units in eight years.

Reflecting suspensions in sales and production in China, Mitsubishi Electric Corp. suffered a sales drop of ¥37 billion in the January to March quarter.

Keiichi Ito, chief quant analyst at SMBC Nikko Securities, said that “sales of both manufacturers and nonmanufacturers worldwide have been suppressed” due to the virus crisis.

He stressed that companies will not be able to survive unless they can review their businesses “in a way that is not bound by custom,” with society and people’s living environment going through massive changes.

On the other hand, some companies have successfully captured “nesting” demand, as people are advised to stay at home.

Nintendo Co. has been enjoying strong sales of Nintendo Switch series game consoles and the Animal Crossing: New Horizons game.

The game has taken the world by storm, with sales hitting 11.77 million copies in the first 12 days after its release on March 20.

Nissin Foods Holdings Co. saw sales of its instant noodles, including the mainstay Cup Noodles, climb in Japan and China, as more and more people ate at home.

Yamato Transport Co. said that the number of packages handled by the parcel delivery firm surged 13.2 percent to 155.99 million in April.

According to the unit of Yamato Holdings Co., the figure, which was the highest for April since 2000, came in response to a rise in the number of people using online shopping websites to buy mainly daily supplies.

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