People go to Shibuya Station in Tokyo, Japan, on January 9, 2021.
Du Xiaoyi | Xinhua through Getty
SINGAPORE – Japan’s latest statement on the state of emergency in parts of the country is unlikely to affect the economy, economists told CNBC.
“The economic impact of the announced measures will be lower compared to the last episode,” Shigeto Nagai, head of the Japanese economy department at Oxford Economics, told CNBC in an email.
He was referring to Japan’s state of emergency, declared in April 2020, in the first days of the coronavirus pandemic. The state of emergency at that time ended at the end of 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 rise in coronavirus infections.
The state of emergency is set to be extended to more areas, with local media reporting that Suga will add seven more prefectures, including Osaka.
Japan has recorded more than 298,000 confirmed Covid-19 infections, while the disease has claimed at least 4,192 lives, according to data from public broadcaster NHK.
Limited impact on Japan
Nagai of Oxford Economics cited several factors to explain the limited economic impact, including trade restrictions that are mainly targeted only at restaurants and bars in emergency areas.
The operating hours of the food and beverage units in these areas will be reduced, according to Suga’s announcement last week. People are also discouraged from going out after 8 pm for non-essential, non-urgent reasons.
The number of people traveling to their jobs will also be reduced by 70% – by telecommunications. However, schools and kindergartens will not be closed this time.
Capital Economics, senior Japanese economist Marcel Thieliant, told CNBC: “The restrictions are very light and mainly affect food and entertainment, which together represent about 3% of GDP.”
“Given that the state of emergency will last only a month, the expansion in the Kansai region will not lead to a pull of more than 0.1% of GDP,” Thieliant said, referring to the latest emergency measures that will be extended. to more areas.
“We still believe that the state of emergency will be extended nationwide and will become more draconian, with shops and restaurants being asked to close completely,” he said, adding that Capital Economics expects a 1.5% quarterly decline in consumption. in the first trimester if that happens.
Suga’s political future
Managing the situation of 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 due to health problems.
Nagai, from Oxford Economics, warned that Suga – whose approval rating has “already fallen sharply in recent weeks” – will receive a “severe blow” if the state of emergency fails and must be extended in a month.
“In addition to a number of political scandals, Suga’s lack of leadership in his relationship with Covid-19 has been heavily criticized,” Nagai said. “The only chance to hold lower house elections is sometime in the fall after the Olympics, and the (Liberal Democratic Party) may start looking for another leader to win the election.”