People walk to Shibuya Station in Tokyo, Japan, on January 9, 2021.
Du Xiaoyi | Xinhua through Getty
SINGAPORE – Japan’s latest declaration of a state of emergency is unlikely to affect the economy in some areas of the country, economists told CNBC.
“The economic impact of the announced measures will be less compared to the last episode,” Shigeto Nagai, head of Japanese economics at research firm Oxford Economics, told CNBC via email.
He was referring to the state of emergency across Japan declared in April 2020, the first days of the coronavirus pandemic. The state of emergency then 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, to try to combat the latest rise in coronavirus infections.
The state of emergency should 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 killed at least 4,192 lives, according to data from public broadcaster NHK.
Limited impact in Japan
Nagai, of Oxford Economics, cited several factors to explain the limited economic impact, including business restrictions that target only restaurants and bars in areas subject to the state of emergency.
According to Suga’s announcement last week, the opening hours of restaurants and beverages in these areas will be reduced. People are also discouraged from going out after eight in the evening for non-essential and non-urgent reasons.
The number of people traveling to their jobs will also be reduced by 70%, through teleworking. Schools and nursery schools, however, will not close this time.
Japan’s senior economist at Capital Economics, Marcel Thieliant, told CNBC: “The restrictions are very soft and mainly affect food and entertainment, which together account for about 3% of GDP.”
“Given that the state of emergency will only last a month, expansion into the Kansai region will not lead to a drag of more than 0.1% of GDP,” Thieliant said, referring to the latest measures. emergency which, according to reports, will be extended to more areas.
“We still think the state of emergency will spread across the country and become more draconian, with shops and restaurants being asked to close completely,” he said, adding that Capital Economics expects a quarter-on-quarter reduction of consumption in the first quarter if this happens.
The political future of Suga
The handling of the Covid-19 situation in Japan could affect the chances of Suga being re-elected, who took over as prime minister last year following the unexpected resignation of his predecessor Shinzo Abe due to health issues.
Nagai, of Oxford Economics, warned that in Suga, the approval rating “has already fallen sharply in recent weeks”, it will be dealt a “severe blow” if the state of emergency is unsuccessful and has been to last more than a month.
“In addition to a number of political scandals, (Suga’s) lack of leadership in dealing with Covid-19 has been widely criticized,” Nagai said. “The only chance to hold elections in the lower house is sometime in the autumn after the Olympics and the (Liberal Democratic Party) may start looking for another leader to win the election.”