Japan, which once garnered positive headlines globally due to relatively lower rate of COVID-19 infections compared to other countries and seemed to have passed through the worst of the virus outbreak, is now on alert as the country is witnessing spike in new COVID-19 cases in recent weeks.

This is likely to dampen investor sentiments. Investors, who are wary of the rising cases and the consequences on the business environment and the country’s economy, are expected to remain cautious on placing bets, according to GlobalData, a leading data and analytics company.

Tokyo, where a state of emergency was removed on 25 May, started registering new cases in July. It registered 224 new cases on 9 July and crossed 200 mark for the first time. Realizing the gravity of the situation, the Tokyo Metropolitan Government on 15 July raised its COVID-19 alert to the highest level, which is still in force.

Amid the continued spike in COVID-19 infections in July and August, Tokyo reported 263 new cases on 5 August. It also reported 472 new cases on 1 August. Aichi and Osaka have also been seeing growth in COVID-19 infections and reported 144 and 196 new cases, respectively, on 5 August.

Aurojyoti Bose, Lead Analyst at GlobalData, says: “If new COVID-19 cases continue to increase and Japan is forced to impose nationwide state of emergency, it will be a big blow to the country’s economy. The Bank of Japan in its forecast issued on 15 July expects the economy to shrink by 4.7% in fiscal 2020 and the recent surge in new cases signalling towards a second wave of COVID-19 infections may pose further risks for the country’s economy. It will also dent the recovery of business sentiments, which started picking up as the number of COVID-19 cases slowed down in late May.”

M&A and VC deals which stood at 62 and 52, respectively, in April 2020, the month when Japan imposed a state of emergency, decreased to 56 and 43, respectively, in May. Nevertheless, investor sentiments started picking up, subsequent to the removal of state of emergency in late May, with M&A deal volume increasing to 66 in July while VC deal volume remain unchanged at 43.

Bose concludes: “With the recent spike in cases likely to dampen investor sentiments, it would be noteworthy to see if the momentum persists during the coming months.”

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