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According to a Reuters Corporate Survey, almost half of Japanese firms saw their output and sales slide last month. The poll shows that two-thirds are anticipating the impact from the COVID-19 pandemic to last several months or longer, portending a big blow to an economy teetering on the edge of recession.

The Reuters Corporate Survey, conducted from March 2-12 for Reuters by Nikkei Research, canvassed 501 big and mid-size non-financial companies. Roughly half answered questions on the new virus impact on condition of anonymity to express opinions freely.

Key notes

  • 47% of Japan firms say fallout from coronavirus outbreak caused output and sales to fall in February.
  • 21% of Japan firms see virus impact ending in several weeks; 43% say it will be months; 22% see no end for foreseeable future.
  • Majority of Japan firms see virus impact to last months or more.
  • About half say virus impact causes declines in output, sales.
  • Some 47% suffer supply-chain disruption, reviewing supply chain.

Reuters reported that, “a prolonged impact on corporate Japan could hamper Prime Minister Shinzo Abe’s “Abenomics” aim of generating a self-sustaining growth cycle led by private-sector investment and spending.”

In written comments, many companies complained about the closing of factories in China, event cancellations, a slump in tourism and declining trade with top partner China.

On the other hand, some managers in industries such as retailers saw sales jump as consumers rushed to stock up on daily necessities like toilet rolls, masks and groceries.

“China-bound demand is falling because clients’ factories there are running at utilisation of 50% to 70%,” wrote a manager at a paper and pulp maker. “We are trying to replace the production base with factories in other countries, but output has not returned to the same level as before.”

A machinery maker manager wrote: “Our clients are trying to avoid receiving services as much as possible, which has reduced points of our contact with customers” worried about infections.

FX implications

USD/JPY has been making a come back due to the dollar’s advance and there is a question hanging over the yen – how long before its snaps? The Japanese economy is in trouble and investors could be looking for safety in US Treasuries, which is likely to propel the cross higher, especially if invsors ditch the yen as a safe haven.