Days after the tax increase went into effect, Typhoon Hagibis slammed into Japan, battering its main island, causing enormous damage and further suppressing economic activity.
As Japan has recovered from the storm, its industrial output rose slightly in December. But now the coronavirus poses a serious threat to a crucial market for the goods being produced. Japanese manufacturers are major suppliers to Chinese companies, sending them everything from precision machine tools to components for smartphones and cars.
Even before the outbreak, Japanese companies were struggling to cope with the effects of China’s economic slowdown, a result in part of its trade war with the United States. Japanese exports to China were down 7.6 percent in 2019 from the previous year.
The epidemic has also affected operations of Japanese companies inside China. In response to the virus, the Chinese authorities extended the Lunar New Year holiday, effectively shutting down manufacturing work for many Japanese companies.
The toymaker Tomy lowered its earnings estimates for the end of the financial year, which closes March 31, because of a slowdown in production in China, Japan’s national broadcaster, NHK, reported. Nintendo has said it will delay shipments of its Switch console to Japanese consumers as a result of the outbreak.
Addressing investors this month, Hiroki Totoki, a top executive at Sony, warned that the outbreak could have a “major impact on our supply chain, logistics and sales,” potentially erasing a projected increase in earnings growth.
But perhaps no businesses in Japan are feeling the effects of the epidemic as much as those dependent on tourism, which has grown significantly in importance to the Japanese economy in recent years. The number of visitors to Japan has more than tripled over the last decade, reaching 31 million in 2018, according to government statistics.