Worsening business sentiment due to the spread of the novel coronavirus has become evident. It is hoped that the public and private sectors will work together to overcome the crisis.
The Tankan quarterly economic survey for June released by the Bank of Japan showed that the diffusion index, which indicates business confidence among companies, has plunged to its lowest levels since the collapse of Lehman Brothers.
The index for large manufacturers, whose export rates are high, fell 26 points to minus 34 from the previous survey. This is the lowest level in 11 years since June 2009.
The index for large nonmanufacturers, which are driven mainly by domestic demand, dropped 25 points to minus 17, the lowest level since December 2009. The 25-point reduction since the previous survey is the largest in its history.
Domestic and foreign demand has plummeted due to the spread of infections worldwide, and many industries have been severely damaged. It can be said that this reflects the current serious situation of the Japanese economy.
The drop in the automobile industry, in which global sales plunged, was noticeable. The index dropped 55 points to minus 72. Regarding the domestic demand-related category, the index for accommodation and eating and drinking services was minus 91, and that of services for individuals, including entertainment facilities such as amusement parks, was minus 70.
Small and midsize companies also showed a serious decline. The index for manufacturers in this category was minus 45, while that for nonmanufacturers was minus 26.
What is worrisome is the negative impact on employment. In May, unemployment reached nearly 2 million, while more than 4 million were put on temporary leave.
Employment statistics are considered a lagging indicator that changes in the wake of a shift in the economic situation. Employment could worsen further in the future.
The government must prevent an increase in unemployment by supporting corporate financing, and make efforts to stimulate demand.
The implementation of the supplementary budgets for fiscal 2020, which were passed twice, has been delayed.
It is essential to promptly deliver 100,000 yen in cash per person and benefits to small and midsize companies to help sustain their operations. The government should steadily provide financial assistance to companies, including through capital injections.
As to these benefits to help sustain businesses, the government has been criticized for its handling of issues of subcontracting to a private company and selecting businesses. Ensuring transparency in implementing budgets must not be forgotten.
The battle against the coronvirus is expected to be prolonged. The government and the central bank should take additional measures as necessary.
Companies'efforts to help themselves are also important. Large companies, expecting a slight improvement in future business confidence, plan to increase their amounts of capital investment in fiscal 2020.
There seems to be a strong desire to invest in the information technology sector in response to "new ways of life" such as teleworking. It is hoped that companies with surplus capacity will continue to make positive investments.
For the time being, the restaurant and tourist industries will be forced to conduct limited operations to avoid crowded situations. It is important to explore new business models.
-- The original Japanese article appeared in The Yomiuri Shimbun on July 2, 2020.
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