BOJ report: Tough situation seen for regional economies

14-Apr-2020 Intellasia | JapanNews | 6:02 AM Print This Post

A Bank of Japan report on regional economies casts a harsh light on a situation where the spread of novel coronavirus infections is affecting various parts of the country.

According to the central bank’s Sakura report for April released Thursday, personal consumption has plummeted and the production of automobiles and other products has been seriously affected. Amid such a situation, demand and supply could “vanish” altogether, and some companies say the impact of the coronavirus is greater than that of the collapse of Lehman Brothers.

Demand drops across board

The report is full of bitter statements such as one from an accommodation business in the Shikoku region, which stated: “The number of reservation cancellations increased rapidly. Events scheduled nearby have been canceled one after another. There is no sign of bottoming out.”

Actually, Kyoto Prefecture, one of the most popular tourist destinations in Japan, is in a serious situation. Ryokan Kohro, a hotel near a sightseeing spot in Nakagyo Ward, Kyoto, saw its occupancy rate drop to 30 percent in March. It is less than half of the average level. The 70-year-old chair of the hotel said, “It’s going to be tough unless guests come back by around autumn.”

The report also includes a statement from a restaurant business in the Kanto and Koshinetsu region, which said, “Sales at some restaurants fell by 50 percent from a year ago due to the declining number of office drinking parties and other reasons.” As seen in this statement, the restaurant industry is severely hit by the spread of the coronavirus infection.

The government has declared a state of emergency for seven prefectures including Tokyo and Osaka Prefecture. In these prefectures, more and more outlets such as department stores are temporarily closed or have shortened business hours. Under such a situation, the impact on personal consumption is highly likely to spread from the hotel and restaurant sectors to other sectors.

Naoya Araki, the president of H2O Retailing Corp., which operates Hankyu Hanshin department stores, told The Yomiuri Shimbun, “Compared to the Lehman collapse and the consumption tax hike, the latest drop is incomparably huge.”

Production halted

Export-oriented manufacturing companies are also being severely affected.

“I keep telling myself that the effects of the new coronavirus will calm down in one or two months. But if the current situation lasts for another six months or a year, my company will face financial difficulties,” said a manager of an auto parts maker in Fukuoka Prefecture, which mainly processes and repairs vehicle seats. An automaker to which the parts maker supplies products has been reducing production since February, so the number of orders received in April is expected to decline by nearly 40 percent from its initial expectations.

In the report, a transport machinery company in the Kyushu and Okinawa regions said, “Concerns over declining global demand for automobiles are making future prospects considerably uncertain.”

Toshiro Miyashita, the head of the Bank of Japan Fukuoka Branch, told a press conference on Thursday: “With the number of infected people increasing, corporate business sentiment rapidly deteriorated in April. Some companies are concerned about whether they will be able to maintain the production systems at their plants.”

If demand and production decline together, it will affect both employment and income. In the latest report, the central bank downgraded its assessments on employment and income items for five regions including Hokkaido, Hokuriku and Chugoku.

The report also noted that there are moves in several regions in which companies, mainly in the service sector, have stopped hiring new employees. A precision machine parts company in the Tohoku region said in the report, “We did not renew contracts with temporary staff due to a decline in production.”

https://the-japan-news.com/news/article/0006483007

 

Category: Japan

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