TOKYO (Reuters) – A prolonged and widespread coronavirus outbreak could hit Japan’s economy, affecting tourism, retail and exports, among other areas, a senior International Monetary Fund official warned.
“The spread of coronavirus poses an emerging downside risk to Japan’s economy, although the economic impact will depend on the extent of the spread of the disease and policy responses,” Paul Cashin, the IMF’s mission chief for Japan, told Reuters.
“If prolonged and widespread, this would likely affect Japan’s tourism and retail activities through a decline in tourist arrivals and spending from China and elsewhere,” he said in a written interview released on Tuesday.
The virus outbreak could also affect trade and investment as any further slowdown in China’s economy could hurt Japanese companies’ output and disrupt supply chains, Cashin added.
Cashin did not give estimates on how much the outbreak could affect Japan’s growth, saying the impact will be taken into account when the IMF next updates its global forecasts in April.
The virus, which began in China and spread to 27 countries and regions, has heightened concern among Japanese policymakers that the world’s third-largest economy – already hurt by soft global demand and private consumption – could slide into recession.
Japanese carmakers produce parts and retailers sell a wide array of goods in China, which is Japan’s second largest export destination.
The outbreak is also a blow to Japanese department stores and hotels, as the Chinese make up 30% of all tourists visiting Japan and nearly 40% of the total sum foreign tourists spent last year, according to an industry survey.
Reporting by Leika Kihara; by Jacqueline Wong