Japan declares virus emergency for Tokyo amid record cases

[TOKYO] Japanese Prime Minister Yoshihide Suga declared a state of emergency Thursday for Tokyo and adjacent areas, trying to stem Covid-19 infections that hit a daily record in the capital.

The declaration covers the capital and the surrounding prefectures of Kanagawa, Saitama and Chiba, Mr Suga said. It will be imposed from Friday until Feb 7.

Mr Suga is set to hold a news conference later to discuss the matter. Tokyo announced it had found 2,447 cases of coronavirus on Thursday, a record.

Japan's emergency doesn't imply the kind of lockdowns seen in some parts of Europe, and the government is seeking far less stringent measures than under its previous emergency last year, which triggered the worst economic contraction on record.

Residents will be asked to avoid going out only after 8 p.m. and bars and restaurants will be instructed to close at that time. Authorities can't enforce compliance for now, though Suga is seeking to amend the law to add penalties for businesses that don't abide by government measures, and formalise incentives for those that do.

Bloomberg Economics' Yuki Masujima sees the emergency declaration shaving up to 0.7 per cent off the economy for each month it lasts. Tokyo and neighbouring areas account for about one-third of the country's gross domestic product.

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Ballooning infections have been a blow for Mr Suga, who had sought to restore growth despite the pandemic, including by offering domestic travel incentives to bolster the tourism industry. His public support has slumped, with polls showing most voters favour tougher pandemic measures.

"This increases the possibility of an economic contraction," economist Yoshimasa Maruyama at SMBC Nikko Securities said of the emergency. "Suga wanted to wait until after the New Year's holiday to make the declaration and that has put him behind the curve to limit the spread of the virus." Even before Mr Suga first hinted he would declare an emergency, the economic recovery was forecast to slow in the first three months of 2021, with companies scaling back investment and households opting to save more.

The restrictions on activities are likely to hamper the effectiveness of the economic stimulus package Mr Suga put together last month, which is to be funded by an extra budget. The package is no longer suitable in the current environment, Nomura Research Institute economist Takahide Kiuchi said in a research note."The government should change the content of the third extra budget and change the course of economic policy in order to strengthen support for companies and individuals," Mr Kiuchi said.

It will be the second emergency state in Japan after a declaration that began in April, but is not expected to cause as much pain as the first, when the virus slammed the brakes on the economy and sent it into its worst downturn.

Mr Suga's signature "Go To" travel campaign, which had already been suspended through Jan 11, is unlikely to be revived while the state of emergency is in place. The government will press for a return to remote work, aiming to cut the number of commuters in the region by 70 per cent. Schools, however, will not be asked to close and university entrance exams will go ahead as scheduled.

Japan has had by far the lowest infections of any Group of Seven nation, recording fewer cases in the past year than the US has seen in recent days.

BLOOMBERG