BOJ cuts economic assessment of all country’s regions

Bloomberg

The Bank of Japan (BOJ) cut its assessment of all the country’s regional economies in response to the damage caused to production, consumption and corporate finances by the coronavirus, with new emergency restrictions set to add to the pain.
The central bank’s move to lower its views on all nine regions was the first since the global financial crisis, an indication of the severity of the virus impact.
Some analysts are forecasting the national economy will shrink more than 20% this quarter as a partial shutdown of parts of the country puts further downward pressure on growth.
While the central government has unleashed a record stimulus package to help support the economy, pressure could still build on the Bank of Japan to do more if conditions continue to deteriorate.
“The spreading novel coronavirus is having a serious impact on our economy,” Governor Haruhiko Kuroda told the bank’s branch managers before the release of the Sakura report, the BOJ’s equivalent of the Federal Reserve’s Beige Book.
Kuroda cited across-the-board weakness in exports, tourism, consumer spending and factory production. “The economic outlook is extremely uncertain,” he added.
A respondent to the BOJ’s survey of regional conditions who works at a Kyoto hotel said the number of visitors to the city was down sharply. The virus has hit the regional tourism industry harder than the global financial crisis, the person said.
The BOJ’s Osaka branch manager Yasuhiro Yamada backed up that point saying that the flow of tourists had come to a standstill.
Another respondent at a machinery maker on the island of Kyushu said business was being hampered by trouble in the supply chain. The flow of parts from China still hadn’t recovered, the person said, even though factories in the mainland are getting back to work.
The situation could get much worse as economic activity in Japan falls over the coming weeks after the government made a declaration enabling local governments to call on people to stay at home and some businesses to close.
Responding to a recent jump in Japan’s infection numbers, Prime Minister Shinzo Abe declared a state of emergency for Tokyo, Osaka and prefectures that together generate half of the country’s economic output.
Earlier last week, the governor of Aichi prefecture, home to Toyota Motor Corp., called on Abe to add his province to the list, citing increasing infections there. The governor also said the prefecture would declare its own emergency from April 17.
Unlike service-oriented Tokyo, roughly 40% of Aichi’s total output comes from manufacturing, and the prefecture also ships manufacturing products worth 46 trillion yen ($422 billion), or 15% of the nation’s total, more than any other prefecture, according to government data.
Conditions are already severe in central Japan and would worsen in Aichi further if an emergency is declared, said Nagoya branch manager Tokiko Shimizu.
The Bank of Japan next meets April 27-28, when it is due to update quarterly economic projections. The forecasts are likely to be dire, unless the BOJ skips making them as the Fed did last month.