Prime Minister Yoshihide Suga said he will decide Thursday on whether to issue a state of emergency covering Tokyo and the prefectures of Saitama, Chiba and Kanagawa, where the novel coronavirus is spreading quickly.
Suga will consult with an advisory committee of experts on basic response policies for the coronavirus pandemic. If it is determined that the situation constitutes an emergency, Suga will make the declaration on Thursday.
"I announced [on Monday] that I would consider declaring a state of emergency," Suga said Tuesday at a board meeting of the ruling Liberal Democratic Party. "I want the advisory committee to discuss the matter [on Thursday] and give us direction."
Suga added: "What the people want most from the government and the ruling bloc is reassurance and hope. Our first priority is to deal with the coronavirus, and we will do our best."
Declaring another state of emergency is likely to have a major impact on the economy, which had been on a recovery track. On Monday, the first trading day of the year, the Nikkei average of 225 selected issues from the First Section of the Tokyo Stock Exchange temporarily dropped over 400 points from the closing price at the end of last year, due to the uncertainty over the declaration.
The Nikkei average, which had hit a 31-year high for a final trading day on Dec. 30, was no longer in a celebratory mood on Monday, closing down 185.79 points at 27,258.38 yen. This was the third consecutive year to see a decline on the first trading day of the year.
Concerns that the declaration will curb the movement of people led to heavy selling in sensitive industries such as department stores, railroads and airlines.
Takahide Kiuchi, executive economist at the Nomura Research Institute, Ltd., estimated that 4.89 trillion yen in consumer spending would be lost if a state of emergency was declared for one month covering Tokyo and the three prefectures. This is equivalent to 0.88% of Japan's gross domestic product for one year.
When the last declaration was issued nationwide in April and May of last year, a total of about 22 trillion yen in consumption was estimated to have been lost. If the next declaration is limited to one month and covers only Tokyo and the three prefectures, the impact could be reduced to slightly over 20% of the previous figure.
However, Kiuchi said, "There could be more bankruptcies and closures among companies that had managed to hold out in the hope that the pandemic would be brought under control, and unemployment could rise."
Kiuchi urged the government to increase direct support such as benefits and subsidies, as there is strong concern that the economy will fall sharply again with negative real growth in the January-March quarter of 2021.
"The government should significantly review its economic policies to strengthen support for businesses and individuals," he said.
When the previous state of emergency was declared last spring, people refrained from going out, and a wide range of industries felt the impact, including restaurants and tourism. A spokesperson for major restaurant operator Royal Holdings Co. said: "We'll comply with the request [to shorten business hours], but we also have a role to play as social infrastructure. We want to respond in a balanced way."
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