People walk at Shibuya Station in Tokyo, Japan, January 9, 2021.
Du Xiaoyi | Xinhua via Getty
SINGAPORE – Japan’s latest statement on the state of emergency in parts of the country is unlikely to have a major impact on the economy, economists told CNBC.
“The economic impact of the announced measures will be less compared to the last episode,” Shigeto Nagai, Japan’s head of economics at research firm Oxford Economics, told CNBC via email.
He was referring to Japan’s national state of emergency declared in April 2020, in the early days of the coronavirus pandemic. The state of emergency at the time ended in late May.
This latest state of emergency in Tokyo, Saitama, Chiba and Kanagawa until February 7 was announced by Japanese Prime Minister Yoshihide Suga last week in an attempt to combat the latest increase in coronavirus infections.
The state of emergency is expected to expand to more areas, with reports from local media that Suga will add seven more prefectures, including Osaka.
Japan recorded more than 298,000 infections confirmed by Covid-19, while at least 4,192 lives were killed by the disease, according to data from the public broadcaster NHK.
Limited impact in Japan
Nagai, from Oxford Economics, cited several factors to explain the limited economic impact, including restrictions on businesses that mainly target restaurants and bars in areas under a state of emergency.
Opening hours for restaurants and drinks in these areas will be reduced, according to Suga’s announcement last week. People are also discouraged from leaving after 8 pm for non-essential and non-urgent reasons.
The number of people traveling to their workplaces will also be reduced by 70% – through teleworking. Schools and kindergartens, however, will not be closed this time.
Capital Economics senior economist for Japan, Marcel Thieliant, told CNBC: “The restrictions are very soft and mainly affect dining out and entertainment, which together account for about 3% of GDP.”
“Given that the state of emergency will last only a month, the expansion into the Kansai region will not result in a drag of more than 0.1% of GDP,” said Thieliant, referring to the latest emergency measures that will be expanded to more areas.
“We still think the state of emergency will be extended across the country and made more draconian, with stores and restaurants calling for a total closure,” he said, adding that Capital Economics expects a 1.5% drop in consumption in the first quarter. to quarter quarter if that happens.
Suga’s political future
The treatment of the situation at Covid-19 in Japan could affect the chances of re-election of Suga, who took over as prime minister last year after the unexpected resignation of his predecessor Shinzo Abe for health reasons.
Oxford Economics’ Nagai warned that Suga – whose approval rating “has already dropped dramatically in the past few weeks” – will receive a “serious blow” if the state of emergency is not successful and needs to extend beyond a month.
“In addition to a series of political scandals, (Suga’s) lack of leadership in dealing with Covid-19 has been severely criticized,” said Nagai. “The only chance to hold an election in the Chamber of Deputies is sometime in the fall, after the Olympic Games and the (Liberal Democratic Party) can start looking for another leader to win the elections.”