Japanese merchants may never have been more worried.
Sentiment among store managers, barbers, taxi drivers and others who deal directly with Japanese consumers plummeted to a record low at the end of last month, according to results announced yesterday from a Cabinet Office survey that goes back to 2002.
The Economy Watcher’s survey is one of the first consumer-related data points released by the Japanese government each month, so it offers an early glimpse of how people on the ground are feeling about the fast-moving impact of COVID-19.
Photo: Bloomberg
An index in the survey measuring people’s view of their current circumstances showed more gloom than after 2011’s deadly tsunami disaster or during the global financial crisis.
The situation is likely to have gotten worse since the survey. With infection numbers jumping recently, Japanese Prime Minister Shinzo Abe on Tuesday declared a state of emergency covering Tokyo, Osaka and five other hard-hit prefectures, which took effect yesterday.
He also unveiled a record aid package to stem the economic damage as the country hunkers down.
A separate report released yesterday by Tokyo Shoko Research showed Japanese bankruptcies jumped 12 percent last month from a year earlier.
Business failures have increased by double digits in each of the last four months.
Some economists now see the economy shrinking more than 20 percent this quarter, while Goldman Sachs projects the economy would contract by 25 percent this quarter.
The call to stay at home, while not legally binding, would push down consumer spending by 25 percent on an annualized quarter-on-quarter basis and further reduce business spending, Goldman Sachs economists Naohiko Baba and Yuriko Tanaka wrote in a note yesterday.
They also see exports plunging 60 percent in the quarter.
The measures in Japan are of a different dimension from the lockdowns imposed in Europe and the US, given that most measures do not carry legal force and with public transport, financial services and food stores continuing, the economists said.
“However, we expect the explicit declaration of a state of emergency to meaningfully change the behavior of individuals, business owners and event organizers. We expect a change in how people act, including stepped-up business suspensions and people refraining significantly more from activities outside the home,” they wrote.
The month-long state of emergency gives regional governors more power to press businesses to close, but will add to pains the virus has inflicted on the world’s third-largest economy from supply chain disruptions and travel bans
Tokyo Governor Yuriko Koike is expected to announce tomorrow what categories of businesses are going to have to shut, so many shops and businesses have been left to decide on their own for now.
Department stores, karaoke parlors and some non-essential businesses, such as Starbucks, have already said they would temporarily close.
Additional reporting by Reuters
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