Inside the Billion-Dollar Toll the Coronavirus Could Take on the Japanese Economy
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Analysts say Japan, which boasts the world’s third largest economy, could soon be facing a recession — and the novel coronavirus could be in part to blame.
Already in the midst of an economic slowdown, experts say Japan is now facing decreased tourism and a drop in exports because of the virus. For the fourth quarter of 2019, the island nation grappled with the financial dips caused by a sales tax increase and a devastating typhoon, both which occurred in October, along with a decline in Chinese demand for Japanese products. In a report on Monday, the nation revealed that its gross domestic product shrank 1.6% for Q4, the largest drop since 2014, with annualized growth slipping 6.3%.
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Hopes of recovery have been dampened amid coronavirus threats.
“The government had hoped Japan’s economy would continue a moderate recovery. But we must be vigilant against the impact of coronavirus on both domestic and overseas economies,” said Yasutoshi Nishimura, Japan’s economic minister, in a statement on Monday.
So far, the confirmed death toll from the coronavirus has reached nearly 1,900, with more than 73,000 confirmed cases worldwide. The vast majority of the roughly 72,500 cases were diagnosed in China. But the illness has had a negative impact on stock markets across the globe, particularly in the Asia-Pacific region. Japan’s tourism industry could be particularly impacted by the virus.
Some 8.1 million people traveled from China to Japan in 2019, according to the Japan National Tourism Association, and Chinese tourists accounted for about 37% of the $44 billion Japan’s tourism sector brought in last year. But now upwards of 760 million people, representing more than half of China’s population, live in communities that have placed restrictions on travel; meanwhile, in January, China placed a ban on outbound group travel.
The Japan Association of Travel Agents estimates that 400,000 Chinese travelers will cancel trips to Japan by the end of March. The country could lose $1.29 billion in tourism revenue for the first quarter of 2020 due to a decline in Chinese air travel, the International Civil Aviation Organization forecasts.
Additionally, several high-profile events in Japan have been canceled amid coronavirus fears. Emperor Naruhito’s public birthday address, which was to be held on Feb. 23, has been called off; the annual event typically draws tens of thousands of people and has not been canceled since 1996. Organizers made the decision to scrap the mass participation field for the Tokyo Marathon, which was expected to draw 38,000 runners. The March 1 race will now only allow elite runners to participate. In the fashion space, Prada announced this week the postponing of its resort ’21 show in Japan, which was scheduled for May 21.
Despite a number of large-scale events being postponed, Japanese Prime Minister Shinzo Abe says there is no plan to reschedule the 2020 Summer Olympic Games in Tokyo, which are scheduled for July 24 through August 9.
As of December 2019, domestic sponsorship revenues for the Tokyo Olympics had reached a record high of about $3.3 billion, the International Olympic Committee said, with more than 60 companies signed on as partners. In total, organizers forecast revenues of $5.9 billion from the Olympic Games.
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