Japan braces for Q4 GDP slump, decline in output on coronavirus fears

Japan is among countries worst affected by the epidemic outside China, with 251 confirmed cases including those on a cruise ship.

Japanese policymakers on Friday braced for a sharp contraction in October-December growth and warned of the hit to output and consumption from the coronavirus outbreak, signalling alarm over a darkening outlook for the world's third-largest economy.

Bank of Japan Executive Director Eiji Maeda said gross domestic product (GDP) may have suffered a "big contraction" in the final quarter of last year due to sluggish overseas demand and damage to consumption from last year's sales tax hike.

"Japan's economy is expected to continue expanding moderately as a trend," thanks to robust capital expenditure and government spending, Maeda told parliament.

"But we need to be vigilant against various risks such as the impact the coronavirus outbreak could have on output and spending by inbound tourists," he said.

Economy Minister Yasutoshi Nishimura also told reporters the virus outbreak, as well as unusually warm weather that hurts sales of winter clothing, were "fresh factors weighing on the economy."

Analysts polled by Reuters expect Japan's economy to have shrank an annualised 3.7% in the October-December quarter, which would be the fastest pace of decline since 2014. The GDP data is due 8:50 a.m. Monday (2350GMT Sunday).

Japan is among countries worst affected by the epidemic outside China, with 251 confirmed cases including those on a cruise ship.

Some analysts expect Japan's economy to suffer another contraction in the current quarter as China's virus outbreak hurts exports, output and consumption through a sharp drop in overseas tourists.

The government decided on Friday to spend 10.3 billion yen from budget reserves to respond to the coronavirus.