Coronavirus outbreak in China Hits Corporate Revenues & Factory Production Of Japan

Publisher: The Insight Partners

Japanese Economy Minister Yasutoshi Nishimura warned on Tuesday that corporate profits and factory production might take a hit from the coronavirus outbreak in China that has rattled global markets and chilled confidence.

Asian stocks extended a global selloff as the outbreak in China, which has killed 106 people and spread to several countries, fueled concern over the damage to the world’s second largest economy - an engine of global growth.

“There are concerns over the impact to the global economy from the spread of infection in China, transportation disruptions, cancellation of group tours from China and an extension in the Lunar Holiday,” Nishimura told a news conference after a regular cabinet meeting.

“If the situation takes longer to subside, we’re concerned it could hurt Japanese exports, output and corporate profits via the impact on Chinese consumption and production,” he said.

China is Japan’s second largest export destination and a huge market for its retailers. The Chinese make up 30% of all tourists visiting Japan and nearly 40% of the total sum foreign tourists spent last year, an industry survey showed.

“We’re worried that sales and the number of shoppers could fall if the outbreak persists,” said a public relations official at Isetan Mitsukoshi Holdings (3099.T), a major Japanese department store operator.

“It’s not just about Chinese tourists. We’re also worried that concern over the outbreak may keep Japanese shoppers home.”

Automaker Honda Motor (7267.T), which has three plants in Wuhan, the capital of Hubei province and the epicenter of the outbreak, plans to evacuate some staff. Aeon (8267.T) will close its shopping malls in the city until Thursday.

Economists at SMBC Nikko Securities estimate that if a ban China has imposed on overseas group tours lasts another six months, it could hurt Japan’s economic growth by 0.05%.

Some expect the potential damage could be much worse.

The outbreak could hit Japanese department stores, retailers and hotels, which count on a boost to sales from an inflow of Chinese tourists visiting during the Lunar Holiday.

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