Japan govt, firms concerned about supply chain damage from new virus

January 25, 2020

Tokyo--In the wake of the spread of pneumonia caused by a new strain of coronavirus after an outbreak in Wuhan, China, the Japanese government and companies operating in the city are strengthening their vigilance.

A prolonged outbreak is likely to deal a blow to the supply chains of Japanese firms such as automakers and electronic equipment makers.

"We'll closely watch the disease's economic impacts with high interest," Japanese industry minister Hiroshi Kajiyama told a press conference on Friday.

Wuhan is a core of supply chains in Asia, bringing together cutting-edge factories that make semiconductors and other high-tech components.

Some 160 Japanese companies operate in the city, including Honda Motor Co. <7267>, Nissan Motor Co. <7201>, Denso Corp. <6902> and Daikin Industries Ltd. <6367>.

Many suppliers in Wuhan already planned to suspend operations before the outbreak, for the Chinese Lunar New Year holiday. "A major blow to supply chains will be avoided during the holiday," an industry ministry official said.

But Japanese manufacturers are concerned that they may be forced to suspend operations for a long period if the disease continues to spread.

Economic losses from the 2003 epidemic of severe acute respiratory syndrome, or SARS, totaled some 40 billion dollars, according to the World Bank. In addition to a fall in consumption, the SARS outbreak disrupted supply chains in Asia.

The fatality rate of the new pneumonia is said to be lower than that of SARS at present, but a Japanese government official said that all possible measures need to be taken. Jiji Press