Recession risk looms with 3rd state of emergency
24 April, 2021
Japan's government is likely to issue a third state of emergency on Tokyo and three western prefectures that could last for approximately three weeks, according to media reports, underscoring its battle to manage a surge in new COVID-19 case numbers.
Some analysts say your choice, expected to be produced as soon as Friday, may push Japan back into recession if retailers are asked to close through the Golden Week holidays, which start in a few days and run through early May.
A renewed state of emergency would also cast doubt on whether Tokyo can host the Olympics in July, despite Prime Minister Yoshihide Suga's assurances it'll proceed as planned.
"The risk of a double-dip recession has obviously heightened," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities. "The impact of imposing curbs on Tokyo and Osaka alone would be quite big."
With thousands of new cases caused by highly infectious strains of the virus, Suga said on Wednesday the federal government will decide this week whether to declare the state of emergency for major places.
If adopted in every four regions that made requests, the emergency measures would cover near 25 % of Japan's population of 126 million and roughly 30% of gross domestic product (GDP).
The federal government is considering imposing state of emergency curbs from April 25 through May 11, Jiji news agency reported.
Other media have raised the possibility of better curbs than those issued last amount of time in January, such as for example requests for department stores and other big retailers to close.
In a news conference on Thursday, Tokyo governor Yuriko Koike urged residents to cancel trips during Golden Week, and non-residents to refrain from coming into the town.
BAD TIMING
"The timing isn't good," since it would hit service spending through the spring leisure season, said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute.
Tsunoda cut his forecast for second-quarter GDP to a 0.5% quarter-on-quarter rise, half the previously projected pace.
Japan's economy has emerged from last year's serious slump because of robust exports.
But analysts expect GDP to have shrunk in the first quarter because of the hit to consumption from the next emergency curbs that rolled out in January and say another consecutive contraction in Q2 that could constitute a recession can be done.
While fresh state of emergency curbs likely won't trigger additional monetary easing, it might affect the lender of Japan's quarterly growth projections due out in a few days, analysts say.
"Given prospects of strong global demand, the BOJ will most likely not make big changes to its forecast of a moderate recovery," said Izuru Kato, chief economist at Totan Research.
"But a contraction in second-quarter GDP can not be ruled out, therefore the BOJ will most likely issue a good amount of warnings on the risks to domestic demand," he said.
Slow vaccine rollouts already are casting a cloud over the fate of the Olympics. Tokyo 2020 organizers said a policeman who caused the torch relay in western Kagawa prefecture had tested positive for the virus.
Source: japantoday.com