Coronavirus outbreak has Japanese consumers stay home, weakening economy further

Coronavirus outbreak weakens Japan's economy

Downward trend in Japan’s economy is becoming obvious recently. According to the preliminary report on the Indexes of Business Conditions for January released by the Japanese government on March 6, the assessment of business conditions is worsening for sixth month in a row. This is the longest deterioration since Lehman crisis in 2008. 

The leading index which is an indicator of the economy several months later was 90.3, down 0.7 points from the previous month. Meanwhile, coincident index showing the current economic situation rose 0.3 points month-on-month to 94.7, rising for the first time in four months. 

Both indexes follow declining trend for the current twelve months. The Minister in charge has commented that the effects of the new coronavirus spreading globally has had a considerable impact on the Japanese economy. 

In addition, a Family Income and Expenditure Survey for January released by the government on the same day, showed household spending was 287,173 yen, a decrease of 3.9% from the same month of the previous year in real terms. 

Since the consumption tax hike last October, spending has been down for four consecutive months. 

The impact of the new coronavirus infection seems not to be reflected into results of this survey because of the survey timing. 

However, Japanese consumers apparently avoid going out and eating out after the outbreak leaving malls and restaurants deserted. 

Tangible signs of stagnating economic activities are found everywhere. It is concerned that downward pressure will further strengthen and situation of anemic economy will be revealed in the next survey.