Japanese policymakers prepare for Q4 GDP decline and virus risks

Japan’s policymakers prepare for a decline in GDP growth and the virus’ impact on consumption and production, warning of poor economic outlook.

Executive Director Eiji Maeda of the Bank of Japan warned that weak export demands and low consumption may have hurt 2019’s final quarter GDP.

Economy Minister Yasutoshi Nishimura said that the virus outbreak and weaker sales of winter clothing due to warmer weather weighed in on the economy.

Analysts estimated Japan’s economy to shrink 3.7% in the October-December quarter.

Apart from China, Japan is among countries that are most affected by the virus outbreak. The world’s third largest economy has 251 confirmed cases, including those on a cruise ship.

Analysts expect another contraction in Japan’s economy due to two counts: the current virus outbreak in China, which is among Japan’s largest market for exports and to weaker consumption and production caused by a drop in tourism.

The government allocated 10.3 billion yen from budget reserves to respond to the threat brought about by the virus.

BOJ’s Maeda said that the central bank will maintain the stimulus program to underpin the economy. However, he stopped short in discussion of additional monetary support, suggesting that the BOJ did not view the virus’ impact large enough to shift its economic projections.

Some in the BOJ worry about the continual shutdown of Chinese factories, which could hurt Japanese firms. The BOJ meets on March 18-19 for a rate review.