TOKYO (Reuters) - A majority of Japanese firms said they have taken steps - from lay offs to pay cuts - to cope with the fallout from the coronavirus pandemic on the world’s third-largest economy, according to a Reuters monthly poll.
Japan, like many other countries around the world, imposed lockdowns this year to curb the spread of the virus, crippling economic activity and exacerbating the country’s first recession in 4-1/2 years.
Prime Minister Shinzo Abe has responded with two stimulus packages totalling $2.2 trillion - including payouts to citizens and ailing firms - but over half of the respondents in the poll were critical of the response.
Indeed, the latest Corporate Survey showed that many of the companies polled have had to curb hiring, lay off workers or cut pay to manage, dashing hopes for a solid recovery as private consumption accounts for more than half of Japan’s economy.
“The jobless rate will remain on the uptrend as more and more firms will become unable to weather the economic pain,” said Hisashi Yamada, senior economist at Japan Research Institute.
“Given the risk of a second wave of infections, the economy will recover only to a limited extent.”
Out of the 55% of Japan firms who saw the pandemic hitting their labour force, two in five said they have curbed new hiring, a quarter slashed pay and another quarter laid off workers, when asked to pick multiple responses, the poll showed.
Meanwhile, only 44% of Japanese firms said they appreciated the government’s response to the economic fallout from the new virus, which many criticised as being too slow as it was tied up in bureaucratic red tape, the survey showed.
“A further delay in (government) response could trigger bankruptcies and cause a spike in the jobless rate,” a manager at a construction firm wrote in the survey.
Asked what the government should focus the most on when dealing with the pandemic, 30% said the prevention of infections, while 29% said corporate financing, the survey carried out between June 2-12 showed.
Economists expect Japan’s economy to shrink at an annualised pace of more than 20% in April-June - which would mark a third straight quarter of contraction - mainly as a state of emergency from April through late May shut many businesses and hurt consumer spending.
In a positive development that could boost productivity, more and more companies are gradually shifting away from old-fashioned business practices that remain a stubborn anomaly in an otherwise high-tech nation.
Nine out of 10 firms saw an increase in the proportion of workers telecommuting since the virus outbreak, while around 90% of firms have taken steps to increase online meetings and avoid face-to-face contacts in daily business activity.
Some two-thirds of companies have lowered reliance on hard-copy paperwork such as for contracts and proposals, and about half the firms have reduced use of a traditional “hanko” or seal to stamp such documents. Some 3% have moved to adopt electronic seal.
The Reuters Corporate Survey, conducted for Reuters by Nikkei Research, canvassed 499 big and midsize non-financial companies, with around 230 of the firms answering questions on the virus impacts on employment and business practice.
Official data suggests Japan’s job market has appeared to withstand a severe economic downturn amid the health crisis, with the jobless rate rising only slightly in April to 2.6%. But the survey underscored the view of some economists who say that rate could be much higher if you take into account discouraged workers and those on furlough.
Reporting by Tetsushi Kajimoto; Editing by Ana Nicolaci da Costa