COVID-19 Spread Accelerates in Japan, Considering Raising Alert Level... 1Q Corporate Profit Forecast Downward Revision

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[Asia Economy Reporter Hyunwoo Lee] As the spread of the novel coronavirus infection (COVID-19) accelerates in Japan, the Japanese government has been put on high alert. While considering raising the alert level, Japanese companies have begun to implement measures such as telecommuting and staggered working hours. There are concerns that if the COVID-19 situation prolongs, the net profits of Japanese companies in the first quarter (January to March) of this year could decrease by more than 6%. This could become another adverse factor for Japanese Prime Minister Shinzo Abe, whose approval ratings have already declined due to the cherry blossom scandal.

According to local Japanese media such as NHK on the 17th, the Ministry of Health, Labour and Welfare held an expert meeting on infection countermeasures related to COVID-19 the day before and considered raising the alert level. At the meeting, it was decided not to raise the alert level as the possibility of the infection spreading to an epidemic level was low. However, the fact that the government considered adjusting the alert level indirectly indicates the seriousness of the government's concerns. The Ministry of Health also stated that it will continue to closely monitor the increase in confirmed cases. Health Minister Katsunobu Kato expressed concern, saying, "The situation is different from before," as the number of infected Japanese who have not visited China is increasing.

With the Tokyo Olympics five months away, concerns are growing that normal hosting and progress will be difficult as various sports events have recently been scaled down or canceled. According to the Asahi Shimbun, the Tokyo Marathon, scheduled for the 1st of next month and also serving as the Japanese men's representative selection for the Tokyo Olympics, is considering reducing the number of participants and is also considering canceling the general public section entirely.

Japanese companies are raising their response levels independently by implementing telecommuting and staggered working hours to prevent employee infections. NTT Docomo, Japan's largest mobile carrier, announced that starting from the 14th, it will implement phased telecommuting and staggered working hours for all of its approximately 200,000 employees. Most meetings will also be replaced by video or telephone conferences. Software development company Towango decided to implement telecommuting for about 1,000 employees starting from the 17th.

If the COVID-19 situation prolongs, it is expected to impact the net profit decline of Japanese companies this year. According to QUICK, a financial information service affiliated with Nihon Keizai Shimbun, the net profits of Japanese companies during the first quarter of this year are expected to decrease by more than 6% compared to the same period last year amid the COVID-19 impact. The 18% year-on-year decrease in new car sales in China in January is raising concerns about the negative impact of reduced demand from China.

Japan's real gross domestic product (GDP) growth rate for the fourth quarter of last year has already turned negative for the first time in five quarters. The Cabinet Office of Japan announced on the 17th that the real GDP for the fourth quarter of last year decreased by 1.6% compared to the previous quarter. The consumption tax rate hike in October last year and consumption contraction due to typhoon damage affected this decline. Naoki Kanemoto, Deputy General Manager at Sumitomo Mitsui Asset Management, forecasted, "The deterioration in corporate performance is likely to continue from the fourth quarter of last year into the first quarter of this year."

Meanwhile, the number of confirmed cases on board the cruise ship "Diamond Princess," docked at Yokohama Port in Japan, increased to 355 on the 16th, raising the total number of confirmed cases in Japan to 414. Additionally, after the first death in Japan from COVID-19 was reported on the 13th?a Japanese woman in her 80s with no history of visiting China?fear of COVID-19 within Japan has intensified.

Kyodo News reported that in a telephone opinion poll conducted over two days from the 15th to 16th targeting voters, the approval rating of the Abe Cabinet dropped by 8.3 percentage points from the previous month to 41%.

This content was produced with the assistance of AI translation services.