The new coronavirus pandemic is beginning to inflict unprecedented damage on the Japanese economy.

In addition to a rapid and sharp decline in demand, the need to restrict economic activities to prevent the spread of the virus is creating a more intractable policy challenge than any we have ever faced.

Government policymakers need to make effective policy decisions and moves very quickly without being influenced by any unwarranted hopes or expectations while sending proper messages about them to the public.

The Bank of Japan’s quarterly “tankan” business confidence survey has portrayed an economy falling like a rock.

The key business sentiment index for large manufacturers sank into the negative territory for the first time in seven years, according to the results of the latest tankan survey announced on April 1.

Sentiment among small and midsize manufacturers and in the services sector is also deteriorating fast. The indicators are expected to fall further in the coming months.

Job data is also weakening. The ratio of job offers to job seekers has fallen, forcing the government to remove the word “improvement” from its assessment of the employment situation.

These gloomy indicators, however, barely reflect the effects of the dramatic expansion of the outbreak in both Japan and the rest of the world in the past few weeks.

Since mid- and late March, the United States and most of Europe have imposed stronger lockdown measures, tightly restricting people’s activities outside their homes.

In Japan, the Tokyo metropolitan government has asked citizens to stay at home as much as possible in a move that reflects a growing trend.

It is almost impossible to predict how long such a dire situation will continue. The pandemic’s economic impacts could become even more damaging.

The government’s monthly economic report for March did not include the word “recovering” for the first time in six years and nine months. It offered a gloomy diagnosis of the nation’s economic health, saying, “The Japanese economy is in a severe situation, extremely depressed by the novel coronavirus.”

Many economists argue that the Japanese economy actually peaked around the autumn of 2018. That means the government’s claim that Japan has achieved “the longest postwar economic expansion" is not factually accurate.

Despite a clutch of data indicating the weakening of the economy that began to appear in early 2019, the government has stuck to the narrative that the nation’s economy keeps “recovering.”

To deal effectively with the current severe economic downturn, the government must not repeat the mistake of delaying altering its assessment of the economic situation.

Over the past seven years, the Japanese economy has been supported by a continuous improvement in the job situation.

But there are still vulnerable elements in the system, including a large number of non-regular workers.

If the economy gets trapped in a vicious cycle in which a decline in employment leads to lower incomes and depressed consumer spending, which in turn causes further job losses, the damage from the new coronavirus pandemic could become even more devastating.

The government needs to provide sufficient financial support to businesses that have been shut down and workers who have seen their incomes drop.

To ensure a smooth economic recovery after the end of the pandemic, it is vital to prevent the foundation of the economy from being destroyed.

One major factor behind the current shrinking of demand is the collective effect of policy measures to contain the outbreak.

That means the kind of measures to stoke demand that are usually taken during ordinary economic downturns may not work this time.

Besides sufficient spending to enhance the capabilities of the nation’s health care system, the government should focus on efforts to shore up the economy in ways that do not impede the battle against the virus, such as taking steps to promote teleworking and other aspects of the digitalization of the economy.

If the infection keeps spreading further, there could be serious disruptions in production and distribution.

It is crucial for policymakers to develop action plans for various scenarios and make sure that there will be no shortages of daily necessities.

--The Asahi Shimbun, April 2