Coronavirus starting to take a toll

The coronavirus will probably result in a contraction in output in countries that account for 40% of Japan’s export in the first quarter. That means that we are now expecting an even larger drop in export volume than we had previously anticipated. Meanwhile, the government has urged organisers to cancel or postpone large events and has shut down all schools until April, which risks undermining domestic demand. The upshot is that the risks to our already below-consensus forecast of a 0.5% drop in GDP this year have shifted to the downside.