TOKYO (Reuters) - The bottom may fall out of Japan’s economy if inbound tourism and domestic demand continue to slump, the head of the country’s banking industry lobby said on Thursday, adding the economy has been hit by the coronavirus more seriously than expected.
The remark came as global stock markets plummeted due to concerns over the coronavirus that has claimed nearly 9,000 lives worldwide.
The world’s third-largest economy shrank an annualized 7.1% in the three months through December, revised data showed earlier this month, more than a preliminary reading of 6.3%.
“The situation is much more serious than I expected at the beginning of the year,” said Makoto Takashima, chairman of the Japanese Bankers Association and the head of Sumitomo Mitsui Banking Corporation (SMBC).
“If especially inbound tourism and domestic demand continue to slump and affect employment, the bottom may fall out of Japan’s economy.”
In addition to the stock market plunges, oil prices also dived on Wednesday, with U.S. crude futures hitting an 18-year low, as governments worldwide accelerated lockdowns to counter the coronavirus pandemic.
Takashima warned Japanese banks would need to prepare for increased credit-related costs, especially in the energy sector, if the oil price remains low.
Takashima also said he “frankly welcomed” the Bank of Japan’s move on Monday to ease monetary policy, saying it could contribute to market stability.
The central bank pledged to buy risky assets such as exchange-traded funds (ETF) at double the current pace.
Reporting by Takashi Umekawa; Editing by Toby Chopra and Raju Gopalakrishnan