Japan companies brace for prolonged virus impact in blow to Abenomics – Reuters poll

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© Reuters. Japan companies brace for prolonged virus impact in blow to Abenomics - Reuters poll© Reuters. Japan companies brace for prolonged virus impact in blow to Abenomics – Reuters poll

By Tetsushi Kajimoto

TOKYO (Reuters) – Almost half of Japanese firms saw their output and sales slide last month because of the coronavirus outbreak, with two-thirds anticipating the impact from the pandemic to last several months or longer, a Reuters poll showed, portending a big blow to an economy teetering on the edge of recession.

The spreading epidemic has hammered global stock markets and disrupted trade, supply chains and tourism, stoking fears of global downturn and piling pressure on governments and central banks to deploy stimulus.

A prolonged impact on corporate Japan could hamper Prime Minister Shinzo Abe’s “Abenomics” aim of generating a self-sustaining growth cycle led by private-sector investment and spending.

The Reuters Corporate Survey found 47% of Japanese firms saw their profits and output being affected by the virus outbreak, with 42% suffering from declines of up to 30% in February.

In written comments, many companies complained about the closing of factories in China, event cancellations, a slump in tourism and declining trade with top partner China.

On the other hand, some managers in industries such as retailers saw sales jump as consumers rushed to stock up on daily necessities like toilet rolls, masks and groceries.

“China-bound demand is falling because clients’ factories there are running at utilisation of 50% to 70%,” wrote a manager at a paper and pulp maker. “We are trying to replace the production base with factories in other countries, but output has not returned to the same level as before.”

A machinery maker manager wrote: “Our clients are trying to avoid receiving services as much as possible, which has reduced points of our contact with customers” worried about infections.

The Reuters Corporate Survey, conducted from March 2-12 for Reuters by Research, canvassed 501 big and mid-size non-financial companies. Roughly half answered questions on the new virus impact on condition of anonymity to express opinions freely.


About half of the companies said their supply chains have been affected by the fallout from the SARS-CoV-2 outbreak and that they have reviewed or are considering reviewing their supply chain.

Some are eyeing alternative production bases in countries such as Vietnam and Thailand. Many faced a shortage because of supply chain disruptions, with about 70% facing a shortfall of up to 10%.

“We will wait until things return to normal because it’s difficult to shift away from China considering costs and distribution networks,” a retailer manager wrote.

About 43% of firms said it would take several months for the virus impact on their business to be resolved, and another 22% saw no end to it for the foreseeable future, the poll showed, in a sign corporate Japan braces for a long battle with the virus.

One wholesaler manager expected the virus impact to last for several months, saying “it’s wishful thinking. Without prospects for early resolution, it would be a serious blow to all industries.” An industrial rubber maker manager wrote: “As long as there’s no cure, we have no choice but say there’s no hope for resolution.”

Japan’s economy, the world’s third-largest, shrank at the fastest pace in six years in the December quarter, and risks from the coronavirus pandemic could push the economy into recession this quarter.

Asked about the need for government support, strengthening of medical facilities and prevention of infections are the top choice, picked by about 60% of firms, followed by an economic package, chosen by 18%.

“We must ban entry of Chinese and South Koreans into Japan. It’s insane to focus economic impact at a time of life-and-death crisis,” a wholesaler manager wrote in response to the survey.

“We must refer to Taiwan to adopt swift, concrete and effective steps,” a transport equipment maker manager wrote. An industrial rubber maker manager said: “It’s too late.”