TOKYO — Just days after Prime Minister Shinzo Abe unveiled a monthlong state of emergency for certain areas of the country in response to the coronavirus pandemic, Japan is bracing for a second blow to its economy, already battered by the sharp drop in tourists from overseas and the postponement of the 2020 Summer Olympics.
While Japan was one of the first countries outside of China to record confirmed cases of the coronavirus, the disease has appeared to spread more slowly here than in other countries. But as the number of cases continued to rise, experts warned that a lack of widespread testing and social distancing measures could result in an explosive spike, particularly in densely populated cities such as Tokyo. Until this week, Abe was reluctant to declare a state of emergency, citing damage to Japan’s already fragile economy.
Bowing to pressure from local governments and medical experts, the prime minister finally made the declaration on Tuesday. But rather than a nationwide state of emergency, his order covered just seven of Japan’s 47 prefectures, including Tokyo and Osaka. Since then, three others have declared their own states of emergency or asked to be included in the national declaration. The state of emergency gives local governments the authority to request that certain types of businesses close or events are canceled. Abe also requested that companies in the affected areas promote teleworking where possible, that schools move to e-learning, and that people avoid what Japan is calling the “three c’s” — closed spaces, crowded places and close-contact settings.
On Friday, Tokyo’s governor Yuriko Koike outlined measures that her government is taking under the declaration, which is expected to last through May 6. These include the closure of entertainment facilities, universities and cram schools (primary and secondary schools had already been closed previously), athletic facilities, theaters, exhibition halls and commercial establishments. In anticipation of this, many department stores and shopping complexes closed voluntarily as early as Wednesday.
The shops at luxury mixed-use developments including Roppongi Hills and Ginza Six have all been shuttered, as have department stores including Isetan, Mitsukoshi, Takashimaya and Daimaru. While bars and nightlife venues have also been asked to close, many restaurants and some department store food halls remain open, but with reduced business hours. Koike has asked restaurants to close no later than 8 p.m., and that citizens avoid going out except for urgent and essential needs. But public transport continues to operate normally, and no roads have been closed.
“Excluding activities such as receiving medical treatment, buying food, going to work or other essential tasks, we request that Tokyo residents stay at home whenever possible,” said an announcement posted on the Tokyo Metropolitan Government’s web site on Friday.
The measures, while significantly more lax than those that have been implemented in many other countries, will nonetheless have a noticeable effect on Japan’s economy, which is already on the brink of a recession. Many retailers have posted large drops in sales compared to a year earlier since tourists from China and elsewhere stopped coming to Japan and spending their money here.
In its first-half financial results report on Thursday, Uniqlo parent company Fast Retailing said it had slashed its full-year sales and net profit forecasts. It now expects net profit to fall 38.5 percent on the year to 100 billion yen, and sales to contract by 8.8 percent to 2.09 trillion yen. The retailer posted double-digit drops in sales and profits in the first half.
As of Tuesday, Uniqlo had temporarily closed 412 stores worldwide. Since then, the company has also closed large-format stores and those in busy areas such as Tokyo’s Ginza and Shibuya districts, and has reduced the opening hours of all other stores in Japan. Uniqlo’s March same-store sales in Japan fell by 27.8 percent year-over-year, and customer numbers were down by 32.4 percent.
“In the wake of COVID-19, we reduced operating hours at a maximum of approximately 260 stores in March, and temporarily closed 63 stores on the weekend of March 28 to 29,” Fast Retailing said. “The monthly data were calculated without excluding stores that were either open for fewer hours or closed temporarily from the total number of same stores or own stores.”
Japan’s already embattled department stores are likely to feel a particularly harsh fallout from the monthlong retail closure in Tokyo and other areas.
Isetan Mitsukoshi Holdings Ltd., the country’s largest department store operator, said sales among its five department stores in the Tokyo metropolitan area had plummeted 43.2 percent in March, compared with the same month last year. The Mitsukoshi Ginza store saw the largest individual drop in sales, at 55.1 percent.
March sales from Takashimaya’s 16 department stores in Japan declined by 35.5 percent, with each store seeing its sales fall by double digits. Tax-free sales to tourists plummeted 92.5 percent from the same month a year earlier.
“Because people across the country refrained from going out for nonurgent and nonessential needs as infections of the novel coronavirus rose, and due to the temporary closure of the Osaka, Nihonbashi, Yokohama and Shinjuku stores on March 28 and 29 in response to the authorities’ request that people refrain from going outside, March sales did not reach last year’s levels,” Takashimaya said in a statement.
H2O Retailing Corp. said same-store sales of its Hankyu and Hanshin department stores in Japan fell by 38 percent on the year in March.
“Due to travel restrictions among many countries and the shortening of business hours in response to the spread of the novel coronavirus, both sales and customer numbers suffered a large decrease, causing harsh results,” H2O said. The company added that sales to international tourists in Japan were just 9 percent of their levels in the same month a year earlier.
J. Front Retailing, which operates the Daimaru and Matsuzakaya chains of department stores, said sales from its 16 stores in Japan declined by 44.1 percent on the year last month.
“In addition to negative effects of the spread of COVID-19, including a drastic decrease in consumption by tourists from overseas and a reduction in customer numbers due to the higher sales tax [from October 2019] and self-imposed efforts not to go out, to mitigate the risk of infection and protect the health and safety of both our customers and staff, all of our stores closed temporarily for four days in March,” J. Front said, regarding the sales drop.
With retailers from department stores to fast-fashion shops closing their doors for at least a month until early May, the current month’s sales figures are expected to be even lower than they were in March. While it’s a small price to pay to keep people safe and prevent a breakdown of Japan’s medical system, it’s a tough pill to swallow for an economy and industry that had hoped to have its best year in recent memory.