Economists Warn of Double Dip Risk in Japan over Virus Emergency

Tokyo, Jan. 4 (Jiji Press)--Economists warned of a double-dip recession in Japan after Prime Minister Yoshihide Suga announced Monday the government's intention to consider declaring again a state of emergency over the novel coronavirus epidemic for Tokyo and three neighboring prefectures. If the emergency declaration is made, the country's real gross domestic product is expected to fall back into negative growth in January-March, they said. "Support measures for businesses and individuals, such as financial benefits and subsidies, should be strengthened" if the government declares a state of emergency again, Takahide Kiuchi, executive economist at Nomura Research Institute Ltd., said. The country's seasonally adjusted GDP in April-June last year dived a real 29.2 pct from the previous quarter on an annualized basis, after the government's state of emergency was in place in April-May. Although GDP rebounded 22.9 pct in July-September, the economy's resilience remains weak. If a state of emergency is issued for Tokyo and Saitama, Chiba and Kanagawa prefectures for one month, consumption worth 4.89 trillion yen would be lost as people refrain from eating out, making trips and buying cars and other products, according to an estimate by Kiuchi. GDP would be pushed down by 0.88 pct on an annualized basis, with the economy sinking into a second bottom, according to Kiuchi. "The employment situation would deteriorate due to rises in corporate bankruptcies and business shutdowns," he warned, urging the government to beef up its support and revise the special law against the coronavirus early in order to strengthen countermeasures. According to Junichi Makino, chief economist at SMBC Nikko Securities Inc., consumption in Japan is believed to have fallen 12.6 trillion yen due to last year's state of emergency. Based on the projection, consumption would decrease by up to 2.7 trillion yen if a fresh state of emergency is issued for one month for Tokyo and the three prefectures, which together account for one-third of the country's GDP, according to Makino. The government would have to take even stronger measures if the expected state of emergency targeting the limited areas fails to produce intended effects and the risk of the medical system's collapse increases, he said. END