A majority of firms said they have taken steps — from layoffs to pay cuts — to cope with the fallout from the coronavirus pandemic on the world’s third-largest economy, according to a monthly poll.
The government used nonbinding social and business restrictions this year to curb the spread of the virus, crippling economic activity and exacerbating its first recession in 4½ years.
Prime Minister Shinzo Abe has responded with two relief packages totaling $2.2 trillion (¥234 trillion) — including payouts to citizens and ailing firms — but over half of the respondents in the poll, conducted by Reuters between June 2 and 12 , were critical of the response.
Indeed, the latest Reuters Corporate Survey showed that many of the companies polled have had to curb hiring, lay off workers or cut pay to manage, dashing hopes for a solid recovery as private consumption accounts for more than half of the economy.
“The jobless rate will remain on the uptrend as more and more firms will become unable to weather the economic pain,” said Hisashi Yamada, senior economist at Japan Research Institute.
“Given the risk of a second wave of infections, the economy will recover only to a limited extent.”
Out of the 55 percent who saw their workforces hit by the pandemic, two companies in five said they curbed new hiring, a quarter slashed pay and another quarter laid off workers, when asked to pick multiple responses, the poll showed.
But only 44 percent of the firms said they appreciated the government’s response to the economic fallout, which many criticized as being too slow because it was tied up in red tape, the survey showed.
“A further delay in (the government) response could trigger bankruptcies and cause a spike in the jobless rate,” a manager at a construction firm wrote in the survey.
Asked what the government should focus on the most when dealing with the pandemic, 30 percent said the prevention of infections, while 29 percent said corporate financing, the survey showed.
Economists expect the economy to shrink at an annualized pace of more than 20 percent in April-June — which would mark a third straight quarter of contraction — mainly as a state of emergency from April through late May shut many businesses and hurt consumer spending.
In a positive development that could boost productivity, more and more companies are gradually shifting away from old-fashioned business practices that remain a stubborn anomaly in an otherwise high-tech nation.
Around 90 percent have seen an increase in telecommuting since the outbreak and taken steps to increase online meetings and avoid face-to-face contact in daily activity.
About two-thirds have lowered their reliance on paperwork, such as for contracts and proposals, and about half have reduced the use of the traditional seals used to stamp such documents. About 3 percent have moved to adopt electronic seals.
The Reuters Corporate Survey, conducted by Nikkei Research, canvassed 499 big and midsize nonfinancial companies, with around 230 answering questions on the how the virus has affected employment and business practices.
Official data suggests Japan’s job market appeared to withstand a severe economic downturn from the health crisis, with the official jobless rate rising only slightly in April to 2.6 percent. But the survey underscored the view of some economists who say the rate can be much higher if you include discouraged workers and those who were furloughed or put on partially paid leave.
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