People demonstrate against state of emergency as Japan's Prime Minister, Yoshihide Suga, is displayed on a giant television screen on January 7 2021 in Tokyo, Japan. Picture: GETTY IMAGES/YUICHI YAMAZAKI
People demonstrate against state of emergency as Japan's Prime Minister, Yoshihide Suga, is displayed on a giant television screen on January 7 2021 in Tokyo, Japan. Picture: GETTY IMAGES/YUICHI YAMAZAKI

Tokyo — Japanese Prime Minister Yoshihide Suga has declared a state of emergency 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, Suga said, adding it will have an impact on the economy. It will be imposed from Friday until February 7 and comes after the Japanese capital said it 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.

“The current wave of infections is worse than we had imagined, but we believe we can overcome it without fail,” Suga told a press conference. “To achieve this we have to ask you to accept restrictions on your lives.”

Residents will be requested to avoid going out after 8pm 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. The government will press for a return to remote work, aiming to cut the number of commuters in the region by 70%.

Suga announced subsidies of up to ¥1.8m ($17,400) a month for eateries that comply with rules on shortened hours.

Ballooning infections have been a blow for 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 favouring tougher pandemic measures.

Bloomberg Economics’ Yuki Masujima sees the emergency declaration shaving up to 0.7% off the economy for each month it lasts. Tokyo and neighbouring areas account for about one-third of the country’s GDP. It’s also possible that other areas could be added to the state of emergency later, though Suga said no emergency was needed in Osaka at this point.

“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 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 Suga put together in December, 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 to strengthen support for companies and individuals.” 

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

Suga’s signature “Go To” travel campaign, which had already been suspended to January 11, won’t be revived while the state of emergency is in place. Schools, however, will not be asked to close and university entrance exams will go ahead as scheduled.

Japan has had by far the lowest rate of infection of any G7 nation, recording fewer cases in the past year than the US has seen in recent days.

Bloomberg

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