In an apparent attempt to avoid the economic damage faced by China and South Korea, Japan opted to ignore the spread of COVID-19 by not testing suspected cases immediately. Now the Olympics might be at stake.
Will the rest of the world take notice, or follow in Japan’s footsteps?
In this article;
- Why did Japan suddenly close all schools?
- Why is Japan not testing for COVID-19?
- The difficult choices governments have to make
- What’s the possible economic fallout?
- What’s next for stock markets?
School closures across Japan
Thursday evening, Prime Minister Abe finally announced all schools across Japan need to close for one month. It appears there was little or no consultation with anyone before the announcement.
Parents across the country were stunned with the announcement — parents have only the weekend to try and figure out what to do with their children by Monday morning. I’ve confirmed with a teacher on Saturday (February 29th), her school is officially closed for a minimum of 2 weeks.
Cities all over Japan have already canceled large public events, shut down Tokyo Disneyland and Universal Studios Japan (in Osaka) for a minimum of two weeks, and even recommending distancing and avoiding leaving your house unnecessarily. However, the shocking lack of advance warning concerning school closures telegraphs sudden desperation of Japan’s government to try to slow down the rate of new infections.
Yet Japan still isn’t testing patients
You might naturally wonder why Japan would close all schools across the country for such a long time since COVID-19 seems to not be infecting children under 9 years of age. Although thankfully young children seem more resilient to the infection (but are not immune — a baby in South Korea is confirmed to carry the infection), young children can still bring the virus home on hands and clothes to mom and dad, grandma and grandpa. It appears the Japanese government’s decision to suddenly close schools across the country is aimed squarely at trying to slow the spread of the disease without causing wide-spread panic.
In stark contrast, Korea has tested over 97,000 citizens as of the writing of this article in an attempt to stamp out the spread of the virus. If someone tests positive for COVID-19, the government has a structured plan for handling patients depending on the severity of their symptoms. Korea is discovering hundreds of new cases, every single day. And unfortunately, as a result of the accurate and responsible recording of new infections, Korea has been repaid by the world with 81 travel warnings or bans issued by other countries against travelers from South Korea.
Unlike in Korea, Japan is not testing for COVID-19. I met a retired high-ranking Osaka city bureaucrat for dinner last night. I asked him why South Korea is testing 10s of thousands of citizens and Japan is not testing at all.
He speculates the Japanese government has decided to make a calculated gamble to keep the Summer Olympics from being canceled. If you start testing, you start finding patients. If there are thousands of patients testing positive for COVID-19 — like in South Korea — Japan could also be put on a no-travel list. This would destroy any hope of the Olympics going forward.
Perhaps Prime Minister Abe got some advice from President Trump and gambled the infection would die out on its own in warmer weather before too many people started dying. Unfortunately for Prime Minister Abe, COVID-19 is spreading in tropical climates like Singapore. Hoping the problem away turns out not to be a winning strategy. Mr. Abe’s sudden closure of schools across Japan seems to suggest he has finally come to realize his mistake.
Unfortunately, there’s no way for citizens here in Japan to know for sure if they’ve contracted the disease because of the complete lack of testing. In fact, hospitals and clinics suggest citizens don’t even bother coming in to get checked unless your fever lasts 4 or more days.
If it turns out COVID-19 is generally very mild for most people, it seems completely impossible people will bother to self-quarantine if there is no reasonable way to get checked for the virus unless you become seriously ill.
Approximately 1/3 of Japan’s population is over 65 years of age and COVID-19 seems to be much more dangerous for older patients.
According to experts, 2/3rds of the world’s COVID-19 cases are likely still not even detected.
Governments have no easy choices
Like Japan and Korea, governments around the globe have an impossible dilemma to solve. On the one hand, government officials can’t snuff out this virus without seriously damaging their country’s own economy and getting ostracized by the rest of the world. Locking an entire country down for weeks or months the way China and Korea are attempting to do simply isn’t an option for most. On the other hand, if you try to only slow the spread of the infection as Japan appears to be doing, businesses will also suffer, the medical infrastructure will inevitably come under severe strain, and people will die unnecessarily.
And this is exactly why COVID-19 is unlikely to be stopped. After grossly underestimating the potential risk of this virus most governments, including Japan, seem to have either decided they can’t stop the disease from spreading or they have calculated trying to stamp out the infection at this point will hurt their economy too much.
With governments unable to stop the spread of infection, airlines and hotels have already started to suffer greatly. Without future layoffs and cost-cutting, many may well collapse if the virus stays with us for any significant length of time. Other market segments will certainly follow and a domino effect will ripple through the worldwide economy.
There has been panic buying of facemasks, food, and paper products throughout Japan. This panic buying behavior has already also been seen in Hawaii and New Zealand, even though these territories have almost no infections. People are already preparing for multi-week quarantines.
Hotels have been deserted for weeks already. Restaurants in entertainment districts were still busy this past weekend, but friends working in the restaurant business are already talking about cut working hours and declining sales. There are already whispers of business closures and bankruptcies if the slowdown continues for more than 3 or 4 months.
It may not be easy for businesses to restart
Businesses shut down due to COVID-19 infections not only face significant financial stress, re-opening after a long shut down could also prove to be very difficult. China is currently trying to gear factories back up, but many businesses think they will not be back to full capacity perhaps for months.
Morgan Stanley has been warning about an impending recession since the middle of 2019. Now they have outline 3 possible suggestions for the economy in a COVID-19 world. None of them look very rosy.
According to El Erin from Allianz;
- a growing number of companies will again be forced to revise downward their earnings guidance for the year or withdraw it altogether because of the exceptional uncertainties
- Some, with limited cash cushions and maturing debt like their sovereign counterparts, will also have to worry about their refunding prospects, with a mounting risk of higher defaults for the most exposed sectors
- In light of all this, it should come as no surprise that a growing number of countries will be announcing emergency stimulus measures.
Expect continued volatility, possibly a short, sharp relief rally this week — possibly due to Central Bank interventions of some kind. Don’t be fooled by these interventions. It doesn’t take an economist to predict more liquidity won’t convince people to buy plane tickets to Korea or a cruise ship ticket to anywhere. Expect continued downward pressure on stock markets if COVID-19 continues spreading throughout Europe and North America.
Ultimately, if patient numbers and fatalities continue to rise, prepare for more panic supply and food hoarding, and an ever-increasing likelihood of major economies falling into recession as corporations announce further downward earnings restatements.
Please seek professional advice before making any investment decisions.
I’m Edward Iftody — If you’d like to learn more about disruptive investing, I encourage you to read more at www.blockchainin.asia