The one-month extension of the government's latest state of emergency declaration over the coronavirus pandemic covering Tokyo and other parts of Japan could reduce the country's consumption by 3.6 trillion yen ($34 billion), according to an economist.
Prime Minister Yoshihide Suga extended the country's second emergency declaration to March 7 on Tuesday, leading Toshihiro Nagahama, chief economist at the Dai-ichi Life Research Institute, to make the estimate.
Amid a resurgence of virus infection cases across the country, the emergency extension "has ensured negative growth of the Japanese economy" in the January-March period from the previous quarter, Nagahama said.
The emergency was expanded to 11 out of Japan's 47 prefectures on Jan. 13, six days after it was declared for the Tokyo metropolitan area. Only Tochigi, located to the capital's north, will be removed as scheduled on Sunday, following a significant improvement in its virus infection situation.
The second virus emergency focuses on requests for people to stay at home, restaurants and bars to shorten their operating hours, and businesses to urge as many employees as possible to work from home.
Nagahama said that the decrease of "nonessential nor urgent" private consumption was predicted to total 1.8 trillion yen if the emergency ended on next Sunday, but is now likely to swell to 3.6 trillion yen.
In addition, he forecasts 159,000 people will lose their jobs in six months, an increase of 78,000 due to the extension, if no measures are taken. That means the unemployment rate, standing at 2.9 percent in December, will increase 0.3 percentage point.
Meanwhile, Nagahama said that the economic fallout from the latest measures is "not as big as" that from the government's first state of emergency, declared nationwide from April to May.
The first emergency was more comprehensive, entailing requests for people to refrain from going out and nonessential businesses to suspend operations. It forced the world's third-largest economy to contract an annualized real 29.2 percent in the April-June period from the previous quarter, its worst recession on record.
"Exports are also relatively brisk when compared to the situation in the first emergency, so I believe Japan's economy won't see a double-digit shrinkage (on an annualized basis) this time," Nagahama added.