MNI INSIGHT: BOJ Concern Over Prolonged Coronavirus Impact

     TOKYO (MNI) - A prolonged coronavirus outbreak that hampers the global

economy and drags down financial markets is a downside risk for Japan's economy,

although the Bank of Japan sees no immediate large-scale impact, MNI

understands.

     With no clear indication as how long the outbreak will last, it is

difficult for BOJ officials to predict the affect, but it has identified two

clear areas of concern; lower exports as China's economy slows and a drop-off in

tourists coming to Japan from China -- particularly in a year when Tokyo hosts

the Olympic games.

     The BOJ believes the fallout for the global economy will be limited if the

situation is largely over after 3 months, although one private sector economist

believes Japan's economy could be lowered by 0.4 percentage point in Q1.

     --TOURISM

     In 2019, around 9.6 million Chinese visited Japan, accounting for about 30%

of total tourists, spending just shy of JPY1.8 trillion - or 40% of the total

spending by foreign tourists, data from the Japan National Tourism Organization

showed.

     A drop in tourism on a par with the outbreak of SARS in 2002/3 will effect

a JPY776 billion hit to GDP this year, Takahide Kiuchi, executive economist at

the Nomura Research Institute and a former BOJ board member, said in a report

Monday.

     The SARS impact was relatively short-lived, lasting just a few months. If

the coronavirus outbreak lasted for a full year and had a similar impact on

visitor numbers, the drag on Japan's economy would be JPY2.48 trillion, lopping

0.45% off GDP, Kiuchi predicted.

     Global financial markets have stabilised a little after an initial wobble

in the wake of the coronavirus outbreak, but sentiment remains skittish and

increased volatility will undoubtedly weigh on sentiment of Japanese firms and

households.

     Japan's government enacted legislation Tuesday to deal with domestic

outbreaks of the coronavirus as global policymakers take steps to slow the

spread of the "infectious disease".

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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