Japan warns of threat of global downturn

Japanese Ambassador in Colombo Akira Sugiyama recently said that although Sri Lanka had been successful in combating Covid-19 pandemic, the continuing global crisis caused serious difficulty to the Sri Lankan economy, especially in export and tourism sectors.

Ambassador Sugiyama said so at the 41st Annual General Meeting of the Sri Lanka-Japan Business Council held recently at the JAIC Hilton where Merrick Gooneratne received the appointment as President of the Sri Lanka–Japan Business Council

The Ambassador said: First of all, on behalf of the Government of Japan, I would like to express our solidarity with the people and the Government of Sri Lanka in combatting COVID-19, while commending the strong leadership of the Government and the business leaders of Sri Lanka in tackling successfully the unprecedented challenges posed by COVID-19. Japan has provided USD9.6M grant aid to help Sri Lanka’s fight against COVID-19, including procurement of essential medical equipment like MRI system and CT scanners and improvement of hospital facilities.

The COVID-19 has had a serious negative impact on the global economy. Both Sri Lanka and Japan, like other countries in the world, are tackling the challenge of resuming and rebuilding economic activities while controlling the spread of the virus.

“Sri Lanka effectively implemented the curfew to contain the spread of the virus, while ensuring the people’s access to basic needs, including food and medicine, and without disrupting essential services in both public and private sectors. Now, the virus infection in Sri Lanka is successfully under control with zero community transmission. This is a commendable achievement. The global pandemic, however, caused serious difficulty to the Sri Lankan economy, especially in export sector and tourism. The Government of Sri Lanka announced several financial and monetary measures to mitigate this economic difficulty, and, most assuredly, they could lead to significant positive impacts on the Sri Lankan economy.

“Japan’s economy is in severe difficulty. The Government of Japan declared a State of Emergency on April 7th to request that the people and business community limit their activities to the minimum, although on a voluntary basis, to contain the COVID-19. Although the state of emergency was lifted on May 25 after pulling off the crisis, we still see new cases of infection every day. As disruption of social and economic activities in Japan and abroad takes a heavy toll on our economy. Japan’s economy contracted by 7.9 % in the second quarter of this year compared with the first quarter, which is equivalent to 28.1 % decline on an annualized basis. Japan is now struggling to strike an appropriate balance between reviving the economy and containing the virus spread. New Prime Minister Yoshihide Suga stressed in his first press conference, the most urgent agenda for the new Government is of course how we will get our economy back on track.

“Let me briefly discuss how consumer habits have changed in Japan after the COVID-19 pandemic, although I have to say that this is my layman’s view.

“As people start to work from home and spend more time at home because of the pandemic, their lifestyle and way of consumption have significantly changed. First, the COVID-19 has brought a considerable shift in the consumer’s style of shopping – from store shopping to on-line shopping. Because of stay-at-home requirement, consumers who were not familiar with online services such as restaurant delivery applications are now experimenting with these new devices. This has stimulated the uptake of digital commerce among more Japanese. Second, we are seeing an increasing demand for the goods and services which make working-from-home easy and efficient and staying-at-home more comfortable and enjoyable, including electronic appliances and online video services. In Japan, such consumption trend is called “nesting consumption”, which means that, like nesting birds, people stay and work at home and buy things online to keep their home tidy and comfortable.

“Next, products essential for the health and wellbeing of people such as masks and alcohol disinfectants are high in demand among consumers since people are now more conscious about hygiene and good health. In this connection, it should be noted that the COVID-19 has caused serious disruptions to global supply chains, resulting in shortages of various products, including such hygiene products. We keenly feel the need to diversify production bases of those products.

“Staying at home and health concerns are also changing payment methods of Japanese people. As some of you may know, Japanese people still have a preference for cash payment in daily lives, but prevalence of online shopping and hygiene concerns about touching money make people go for credit cards or prepaid cards more frequently.

“Since people stay home and do not go out, they do not pay for travel and hospitality services. As in Sri Lanka, in Japan tourism and hospitality business have lost business substantially because of the COVID-19. Since the tourism industry in Japan is increasingly dependent on inbound tourists, the entry ban of foreign tourists has been giving a serious negative impact on the tourism industry, especially local (outside Tokyo) businesses. To address this issue by promoting domestic travel, the Government of Japan has embarked on “Go to Travel Campaign” which gives domestic travelers a discount on travel costs, including hotel accommodations, if hotels or restaurants they use take strict health precautionary measures against the COVID-19.

“Of course, business people like you have much better ideas about these new trends. Having said that, I think that some of these changes will be here to stay even after the COVID-19 threat passes and could even open up new business opportunities.

With the lessons learnt from this pandemic, our two countries should come up with proper strategic moves to convert the global pandemic challenge into opportunities and I hope this would turn a new leaf in Japan-Sri Lanka business relations.”