Economy after COVID-19 crisis _ Japan

Covid-19 case is still increasing globally as of today 20th of October. And as we'd been afraid, the so-called second wave hit European countries, and a number of nations have to strengthen approaches to Covid-19; suspend festival or local event, bar and restaurant close at midnight, gym has to adopt new protocols and so on. In addition, we still don't know when we can start to travel across the border again? Can we have a normal life, such enjoy the social event, bar, or football in a stadium? Some expert expects that the crisis will be done if the vaccine release in the market which estimated 2021 Q1. This article is to provide a scenario after Covid-19 by reading a book Corona Shock survival published by Kazuhiko Toyama CEO of IGP. 

The corona crisis process by three steps; Starts from L (local), then G (global), at last F (finance). 

The crisis in this time is an actual economy, but not a financial economy which we experienced a financial crisis 2008 - 2009 10 years ago. If it's a financial crisis, the impact process from F, and then G, at last L. However, it premises that the impact of L since it's the actual economy. The pandemic let countries lockdown, and still travelling ban. Since tourists don't come to Japan at all, the magnitude influence into the touristic industry, restaurant industry, entertainment industry, grocery industry. All of them are categorized as a local economy. The local economy contributes 70% of the GDP of Japan. And 80% of employee work for the local economy. However, enterprises to serve the local economy is relatively small, or family business. Moreover, such small and mid-size enterprise doesn't have strong financial security. Therefore, the crisis hurt the Japanese economy significantly. That's why the Japanese government launched economic measures immediately which value at one trillion USD. The measure is to promote travel by supporting 35% discount for travel cost, cash hand, 100,000 JPY, to all Japanese living in Japan, financial support to a small-mid size of enterprises. The assessment of the measure will be reviewed and disclosed to the public sooner or later. What I'm seeing is a hotel is much busier, and the touristic place is crowded. Therefore, the govt tactic seems working well and enough to spread the economic crisis.

It's not about SCM crisis that occurred in China, which we had been suffered from not supplying material, such as electronic components, raw material, goods and so on, since china is a factory to all countries. By the way, the meaning of global crisis is the demand drop at the global level. In 2008-9 economic crisis, the impact hurt durable good industries, investments related to such durable goods industries and commodity in the global level. Buyer's motivation cascade from expensive expenses such as house or car, and then cloths. Who is willing to buy a house or car while we suffer from lives under uncertain period? Then, corporate revenue drop leads cash out at a big size of enterprise at the global level. If such a big size of enterprise suffer from cash out, of course, the small-mid side of the enterprise also suffers from cash out even more immediately. From the accounting point of view, account payable (current asset) can't be reduced in the short term. So, once the revenue drop more than break-even points, the finance position turns into negative in quick. How much does your company cash? It'd be a couple of months. In addition, due to the Japanese economy structured with Keiretsu, the global crisis will hurt the local economy too. This is also a critical situation for the Japanese economy. At last, a lot of countries depend China buying and supply power, and Japan too. When 2008-9 financial crisis recovered, the Chinese economic boosted to the global economy. However, we can't expect the Chinese economy boost since the pandemic spread from China.

If the global crisis lasts within a couple of months, it would be solved by economic measure initiated by each government. However, both the local crisis and global crisis continued for more than a half years, it won't be solved by increasing working capital by liquidity funding. Then, the liquidity funding would be escalated toward the solvency issue. If so, the financial sector would be damaged due to the credit issue. And then, risk money turns into bad debt. 

We should not take times longer and longer otherwise, the financial crisis would become a real scenario. Of course, we need to think of stoping the spread of the virus and take care of elder people who are suffering from it severity. At last, once the financial crisis is happening, it takes over 10 years to recovery as Japan have confronted since 1990 babble economy collapse.