Can Japan’s Economy Get Any Worse? It May Soon Find Out

As the coronavirus has prolonged a deep slump in Japan, one ray of hope has come from its avoidance of a crippling lockdown. But it’s unclear whether that can last.

By Ben Dooley and Makiko Inoue

TOKYO — Even before the new coronavirus, Japan’s economy was in trouble. Exports were plummeting on slowing demand from China, and a tax increase at home was keeping shoppers out of stores. The numbers were stark: Economic output contracted 7.1 percent in the last quarter of 2019.

With the coronavirus pandemic, a country that had already looked set to open this year with one of the worst performances among the world’s major economies is bracing for a tremendous blow.

Trade has slowed to a crawl as other leading nations come to virtual standstills to curb the virus. Tourism has nearly evaporated, with bankruptcies starting to pop up among hotels, restaurants and tour operators. Large sports and cultural events have been canceled, and postponing the Tokyo Olympics to 2021 will require a dizzying amount of money and time, while delaying an expected economic boost.

The situation is so dire that even Japan’s unwaveringly optimistic officials now express worry about the country’s growth, saying the economy — the world’s third largest after the United States and China — is facing “severe circumstances” because of the pandemic.

Desperate to get through the storm, the government has passed several stimulus measures, and Prime Minister Shinzo Abe pledged over the weekend that Japan would soon approve the largest package in its history. He said it would exceed the 56.8 trillion yen, or $530 billion, that the country spent to mitigate the damage from the 2008 financial crisis. Mr. Abe’s announcement followed the passage of a $2 trillion intervention in the United States.

Japan’s one ray of light has been that it has not yet instituted the kinds of lockdowns that have halted economic life in parts of China, Europe and the United States. Salarymen are still commuting to the office, and teenagers are still buying streetwear in Harajuku, as the country has seemingly kept its coronavirus outbreak in check.

“If Japan can avoid being shut down, I think the economic damage will be much lighter. That will be the key difference,” said Takuji Okubo, North Asia director at the Economist Intelligence Unit.

But that, too, is now in doubt. In the days since the decision to delay the Olympics, Japan has been announcing significant upticks in coronavirus cases. In Tokyo, which on Sunday reported a single-day high of 68 new infections, the governor asked people to stay inside this past weekend. Many heeded the warning.

Mr. Abe said on Saturday that Japan was now at risk of an explosion of cases as it became increasingly difficult to trace infections and limit clusters. He said that although he did not yet need to declare a state of emergency, “we are barely holding on.”

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Fiat Chrysler looks to resume some Italian production next week: union

MILAN (Reuters) – Fiat Chrysler (FCA) (FCHA.MI) is looking to resume some vehicle production from next week at three plants in Italy if it gets the green light from the government, a union representative said on Monday.

Earlier this month, Italy banned travel within the country and ordered a freeze on all business activities deemed non-essential, including the car industry, until April 3 to curb the spread of coronavirus.

FCA informed unions last week that if the government gave it the go-ahead, the automaker would be ready to resume some of its operations on April 6, Gianluca Ficco, a representative for metal workers union UILM, said.

The sites concerned would be the assembly line for the Jeep Compass in Melfi in southern Italy, Atessa’s plant making light commercial vehicles in central Italy and preparatory operations for the new electric 500 in Turin’s Mirafiori factory, he said.

A spokesman for FCA confirmed that for now, the plan was to resume those three lines next week.

However, Ficco said he did not know whether the government would allow non-essential activities to restart then and thought Rome was more likely to extend the ban.

“In any case, when operations restart, FCA will have to make sure that the highest health and safety conditions are assured in all factories,” he said. “Safety devices will have to be increased for sure”.

Luxury carmaker Ferrari (RACE.MI), which, like FCA, is controlled by Exor (EXOR.MI), the investment firm of Italy’s Agnelli family, said on Friday it would reopen its two Italian plants on April 14, provided it had supplies.

Exor said last week that current plant closures at companies it controls, though temporary, might continue.

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Exclusive: American Airlines in talks to hire Millstein for aid advice

NEW YORK (Reuters) – American Airlines Group Inc (AAL.O) is in advanced talks to hire Guggenheim Securities co-chairman James Millstein for advice on tapping a $50 billion industry relief package available from the U.S. Treasury Department to cope with the coronavirus pandemic, people familiar with the matter said.

Millstein is one of Wall Street’s most seasoned debt restructuring bankers and from 2009 to 2011 was the chief architect of the Obama administration’s overhaul of certain financial firms the government had bailed out, including insurance giant American International Group Inc (AIG.N).

While American Airlines has said it has not yet decided whether it will seek U.S. government aid, Millstein’s anticipated appointment indicates the largest U.S. airline is actively preparing for such a move and girding for negotiations with Treasury officials.

Coronavirus relief legislation enacted last week provides up to $25 billion in loans and loan guarantees for U.S. airlines that have suffered from an unprecedented decline in passengers, with an additional $25 billion available in direct cash grants that could result in the U.S. government receiving ownership stakes in the companies.

Were Millstein to be hired, he would be advising American Airlines on the form and terms of aid it should pursue and how to navigate the U.S. Treasury Department’s process for requesting the financial assistance, the sources said. Advice given to the Fort Worth, Texas-based company would be done in his own capacity, independent of Guggenheim, the sources added.

The sources cautioned that no decision on American Airlines accepting U.S. government aid had yet been made and requested anonymity to discuss the confidential preparations.

American Airlines declined to comment, while Millstein did not respond to a request for comment.

American Airlines said last week it would be slashing its capacity 60% in April compared with the same period a year ago and up to 80% in May due to a dramatic reduction in customers and travel restrictions to curb the spread of coronavirus. Its shares have lost roughly half their value in the last five weeks, giving it a market capitalization of about $6 billion.

The company disclosed this month it had access to more than $7.3 billion of liquidity. Its long-term debt as of the end of December totaled about $23.9 billion.

American Airlines Chief Executive Doug Parker said last week that the company would be eligible for up to $12 billion in total U.S. aid. He added that combining government relief with a “relatively high available cash position” would “allow us to ride through even the worst of potential future scenarios.”

Some terms of the cash grants “aren’t currently well defined,” Parker said, adding that the company was not yet certain it would meet the conditions necessary to receive those funds. He said he expected the aid terms “will not be onerous.”

Millstein, a former Lazard Ltd (LAZ.N) banker, has worked on bankruptcies and other challenges facing many U.S. conglomerates over the last two decades, including representing unionized workers in labor negotiations with General Motors Co (GM.N) and other automakers.

Millstein sold his restructuring advisory firm to Guggengeim in 2018. He most recently advised Puerto Rico on its debt woes, as well as California on how to best grapple with catastrophic wildfires and the bankruptcy of power utility PG&E Corp (PCG.N).

Millstein worked with Parker when he advised US Airways on its merger with American as part of the latter’s bankruptcy reorganization in 2013. Parker was CEO of US Airways before assuming the same role in the combined company.


Should American Airlines seek government aid, it may be forced to accept conditions. Requirements for airlines receiving cash grants include continuing to fly in and out of all U.S. airports that currently have commercial air service, and agreeing to avoid involuntary furloughs of employees, both through the end of September.

The aid would also include restrictions on executive compensation and stock buybacks, as well as suspension of dividend payments. Similar strings are attached to government loans.

United Airlines Holdings Inc (UAL.O) and Delta Air Lines (DAL.N), the other two largest U.S. carriers, have expressed cautious optimism about the government assistance, while warning further measures would be required to stabilize their businesses.

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Coronavirus: Deliveroo pledges 500,000 free meals for NHS workers

Deliveroo, the food delivery service, is to deliver 500,000 free meals to NHS workers across Britain as the coronavirus pandemic intensifies.

Sky News has learnt that the company will announce later on Sunday that it has begun delivering the meals to NHS trusts, and that it is changing its app to allow customers to donate funds for buying meals for doctors and nurses.

Sources said Deliveroo was in the process of signing up restaurant partners and corporate sponsors to support the initiative.

The company will also make a financial contribution of its own to the project.

It comes after a massive outpouring of public and corporate support in Britain for the NHS, amid concerns about the quality and availability of health workers’ protective equipment.

Pizza Hut’s UK operation has committed to donating 300,000 free meals as part of the Deliveroo announcement, according to an insider, while Itsu, the Japanese food chain, also plans to participate.

Deliveroo is understood to be planning to deliver meals in bulk to NHS sites when workers are at the end of their shift.

Its delivery plans include to the new network of field hospitals being set up across the country, including the new Nightingale Hospital at London’s ExCel Centre.

The company will also continue to deliver free food to vulnerable groups during the pandemic.

The pledge from Deliveroo is the latest in a series of benevolent acts by major companies around the world as the scale of the COVID-19 crisis has become apparent.

Some companies, including the giant American bank JPMorgan Chase, have chosen to make cash donations to combating the virus, while others, including Diageo, chemicals giant Ineos and luxury goods group LVMH have retooled production lines to help curtail infections by making hand sanitiser.

Others, such as the pubs chain JD Wetherspoon and Frasers, the sports goods chain controlled by Mike Ashley, have instead cast themselves as corporate villains by showing a callous disregard for their employees.

Matt Hancock, the health secretary, who was diagnosed with coronavirus on Friday, said: “The nation needs the NHS like never before, and we must support every single colleague in the NHS.

“I’m delighted that Deliveroo and partners are playing their part in this great national effort with half a million meals for the NHS.

“We can best come through this if we pull together.”

Deliveroo’s free meals pledge comes days after its founder and chief executive, Will Shu, wrote to Boris Johnson to urge the government to promote the safety of restaurant food amid fears for the viability of thousands of outlets.

Sky News revealed last week that Carluccio’s, the Italian food chain, was on the brink of filing for administration.

Will Shu, CEO and founder of Deliveroo, said: “Those in the NHS working night and day to save lives are the real heroes of this crisis, and we want to do our small part to support them and the vulnerable who aren’t able to leave their homes.

“Deliveroo is a British business and, as the founder, nothing would make me more proud than to use the network we have built to support the NHS, and I know the restaurant sector wants to play its part too.”

The role of big technology companies in helping to mitigate some of the impact of COVID-19 has triggered fresh debate about the power and influence of the sector, particularly in areas such as its sophisticated use of customer data.

Some of those businesses, such as Uber and Amazon, have offered the government their technology and logistical expertise as they seek to repaint themselves as valuable corporate citizens.

Deliveroo has reduced its ‘onboarding’ fee to new restaurants since the outbreak of the crisis, and now offers same-day payment to outlets in an effort to help alleviate their cash flow challenges.

There have, though, reportedly been teething problems for self-isolating riders in securing the proof they need to provide the food delivery app in order to guarantee their continued work for the company.

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Bank of America capital levels allow operational focus during crisis: CEO

(Reuters) – Bank of America Corp (BAC.N) is better positioned to focus on operations rather than financial risk during the coronavirus outbreak, thanks to regulatory safeguards put in place after the financial crisis in 2008, Chief Executive Brian Moynihan said on Friday.

“What’s different this time is clearly our capital liquidity,” Moynihan said in a CNBC interview. “Everything that changed has led the banking industry be in a great condition to service clients continuously for the last few weeks as this thing has hit.”

The second largest U.S. bank by assets has extended more than $50 billion in loans this so far month to commercial clients looking for cash to survive the coronavirus recession. The retail division has fielded more than 150,000 requests to defer payments on mortgages and auto loans. Many requests are managed digitally, he said.

The bank has also been hiring and reallocating employees to the consumer bank to help manage a surge in requests related to the pandemic, according to a memo seen by Reuters. So far this month the Charlotte-based bank has hired 2,000 people and shifted 3,000 internal employees to support its consumer bank.

Bank of America followed its peers like Morgan Stanley (MS.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) in reassuring employees that they would not be immediately hit by layoffs as a result of the pandemic. In the memo sent to employees on Friday, the bank said it “will not do layoffs or job reductions in 2020 due to coronavirus impacts.”

“We don’t want our teammates to worry about their jobs during a time like this,” Moynihan said.

(Corrects second-last paragraph to reflect that Wells Fargo did not suspend layoffs through 2020)

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U.S. regulators give banks relief on accounting standard, derivatives rule

WASHINGTON (Reuters) – U.S. banking regulators announced Friday that banks would have the option of ignoring the capital implications of a new global accounting standard for two years in a bid to ensure banks continue lending through the pandemic.

The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency also voted to allow banks to adopt early a new methodology for measuring counterparty credit risk in derivatives transactions, now functional at the end of March. Regulators said the early adoption could “smooth disruptions” in the market.

The regulatory tweaks mark the latest in a long-running effort by regulators to ease rules on banks amid the coronavirus pandemic, in a bid to ensure they continue lending and supporting the economy.

Specifically, regulators said banks will be able to ignore potentially higher capital requirements they might face under a new global accounting standard. The “current expected credit loss” standard requires banks to estimate potential future losses on loans, which banks have argued could be particularly problematic in the current stressed environment.

Banks now would have the option of delaying for two years the capital impact of the new standard, followed by a three-year transition period. The regulatory relief comes as Congress is poised to pass sweeping economic relief legislation that would have allow banks to ignore the standard for a year.

Separately, the regulators also agreed to allow banks to adopt their new rule on measuring counterparty risk a quarter early if they want. Regulators said by allowing banks to use the new rule sooner, beginning at the end of March, it would give firms access to a more risk-sensitive framework during a volatile time.

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A U.S. recession? Probably. Depression? Only if the virus is untamed

WASHINGTON – A U.S. recession may already be underway. Could it be worse?

The Great Depression that began with a stock market crash in 1929 and lasted until 1933 scarred a generation with massive unemployment and plummeting economic output.

It reshaped America, shifting migration patterns, and spawning new styles of music, art and literature. Under President Franklin Delano Roosevelt, however, it also prompted creation of an array of programs like unemployment insurance, Social Security retirements benefits, and bank deposit insurance that make a repeat unlikely.

The unpredictable and unprecedented path of the coronavirus has drawn parallels with the Depression, in particular with predictions that the rise in unemployment and the percentage drop in economic output could rival those seen in the 1930s.

But for that to happen, the jawdropping numbers likely to be recorded in coming weeks – millions thrown out of work, double-digit declines in gross domestic product – would need to be both deep and sustained over years, not months.

“There is no specific definition of a depression,” said Bernard Baumohl, chief global economist of the Economic Outlook Group. But “it’s palpably different,” than a recession in terms of its length and depth.

In the Great Depression for example, the United States shed 20% of its jobs over three years, four times the share lost in the 2007 to 2009 Great Recession (

Over the four years of the Great Depression nearly a third of U.S. output disappeared. While some economists think U.S. annualized output in the April to June period may fall 14% or more, few think that type of decline will actually persist over time.

Government spending makes a difference. Unemployment claims have skyrocketed, but so has the amount of money the government plans to transfer to people and companies big and small.

These “stabilizers” have proved powerful in past downturns (

Central banks matter too. Federal Reserve policy mistakes and failure to prevent a run of bank closures arguably contributed to the Great Depression.

This time, as in 2007, the Fed and global central banks have moved to soak the economy in cash and enact new programs to try to limit the risk of business failures and sustained unemployment.

The most important next step, a growing body of economists and policymakers say, is fixing America’s public health response. A haphazard patchwork of restrictions across states and a slow-to-mobilize White House could make coronavirus’ impacts worse, health experts say.

President Donald Trump’s push to “reopen” the economy quickly carries risks. Lifting lockdown restrictions too early could cause a second wave of the disease, according to a China-focused study published this week in the Lancet Public Health Journal.

The higher the toll of the virus, and the longer the outbreak lasts, the more damage to the economy.

“The first order of business will be to get the spread of the virus under control and then resume economic activity,” Fed chair Jerome Powell said on Thursday.

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Big banks reassure staff about potential job cuts

(Reuters) – Big banks are postponing decisions about staff cuts as the coronavirus outbreak hits their businesses hard, with executives saying they are unsure how long the outbreak will hurt the economy and worried about being unprepared if business suddenly snaps back.

Morgan Stanley (MS.N), Goldman Sachs Group Inc (GS.N), Wells Fargo & Co (WFC.N), Deutsche Bank AG (DBKGn.DE), HSBC Holdings PLC (HSBA.L) and Citigroup Inc (C.N) were among those on Thursday reassuring staff privately or through public statements that job cuts are not on the table.

Banks are hesitant to make changes because the future is so uncertain, executives and external consultants told Reuters.

“You would be fibbing if you said we can really make guarantees or assurances to you,” said compensation consultant Alan Johnson. “There’s a danger of making promises that you ultimately can’t keep. Nobody knows.”

There could be a sudden surge in activity once cities re-open, people get back to work and markets normalize in a few months – leaving banks unprepared if they fire staff that seem unnecessary now. Or the coronavirus could cause a slow, grinding global recession that lasts much longer.

Banks will be also hesitant to announce layoffs in the event that the pandemic leads to staffing shortages as employees fall ill or choose to stay home, a bank source said.

The industry is also aware of the politics of firing people while benefiting from Federal Reserve programs that have injected trillions of dollars into markets.

The eight biggest U.S. banks decided to stop share repurchases and may cut dividends to show they are not using money unwisely. Wall Street is also expected to slash bonuses this year.

A prominent group of socially minded investors issued a statement on Thursday urging companies to offer paid leave and remote work options during the coronavirus outbreak – anything they can do to avoid job cuts.

Morgan Stanley has made the boldest statement so far among big banks, with Chief Executive James Gorman saying jobs are secure through the rest of 2020. “At the end of this year, we will know what we are dealing with, and hopefully the economy will be on the mend by then,” Gorman said in a memo to all 57,000 employees on Thursday.

Citigroup CEO Mike Corbat ordered a suspension of any planned staff cuts, a person familiar with the matter told Reuters.

German lender Deutsche Bank is pausing future job cuts to give employees “additional certainty” during the outbreak, a company spokesman said on Thursday. Wells Fargo is also suspending new job cuts and paused “initiating new displacements” as it evaluates the situation, according to a spokeswoman.

A Goldman Sachs spokeswoman said the bank has not made any decisions to cut staff this year because of the coronavirus. HSBC said it would hold off on previously announced reductions.

JPMorgan Chase & Co (JPM.N) declined to comment, and Bank of America Corp did not respond to a request for comment.

Banks are usually quick to fire staff in hard times and hire again when conditions improve. The coronavirus is an oddity because it is not clear how long the economic impact will last; because banks are, for once, not the center of the crisis and therefore financially sound; and because the industry is especially sensitive to the politics of cutting staff at a time when the rest of the world is suffering.

“Way too many people have lost their jobs overnight,” Gorman wrote in a note to staff. “Aside from a performance issue or a breach of the code of conduct, your jobs are secure.”

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Airbnb holds meeting with bankers to extend $1 billion debt facility: source

(Reuters) – Airbnb Inc on Wednesday held a phone meeting with bankers to discuss extending an existing $1 billion debt facility as the home rental start-up grapples with a slowdown due to the coronavirus, a source who participated in the meeting said. 

The deliberations echo that of many U.S. companies that have been rushing to borrow more money and boost their cash coffers as the fallout from the pandemic threatens a prolonged downturn.

Airbnb’s current debt facility was agreed in 2016 and was led by JPMorgan (JPM.N), Citigroup Inc (C.N), Morgan Stanley (MS.N), Bank of America Corp (BAC.N), Goldman Sachs (GS.N) and Barclays (BARC.L).

Airbnb has never used the credit facility and it is not expiring for another year, but it is looking to extend that period to be prudent, according to the source.

Airbnb has $3 billion in cash, the person added.

Airbnb’s revenue in 2019 exceeded $4.8 billion, up 35% on year, excluding any foreign exchange impacts, and 2019 was the fourth straight year that the company was cash flow positive, according to the source.

The company, which said in September that it planned to list its shares in 2020, had expected earnings before interest, taxes, depreciation and amortization to break even or be positive in 2020 prior to the coronavirus pandemic, he said. 

The source said Airbnb told bankers that models show the number of nights booked would recover from the current slump, reaching 2019 bookings levels again by early 2021.

Airbnb’s bookings in major cities across the world have suffered as travelers cancel trips and stay at home to protect themselves and prevent the spread of coronavirus, data from Airbnb-analytics firm AirDNA shows.

To demonstrate the resiliency of the business, Airbnb executives shared data from Puerto Rico following Hurricane Maria in 2017.

An internal document shows the number of Airbnb listings in Puerto Rico rebounded from about 7,700 just before the hurricane, to over 8,300 one year later, and now exceed 12,000. 

Airbnb said in a blog post earlier this month that the coronavirus would impact bookings in the near-term.

Still, Airbnb has received inquiries from potential investors who want to acquire a stake in the U.S. home rental company in the wake of the outbreak, people familiar with the matter told Reuters last week.

Two sources said the interest ranges from $100 million to $1 billion, and that Airbnb was still in “listening” mode.

In the United States, Airbnb said it expects its hosts to get some relief from a $2 trillion coronavirus stimulus bill that is nearing a vote in Congress.

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Money Hacks Podcast: Should you invest your CPF money in a turbulent market?

Money Hacks Ep 66: Should you invest your CPF money in a turbulent market?

9:06 min

Synopsis: In this fortnightly podcast series on Mondays, The Business Times breaks down actionable financial tips.

In this week’s episode, we talk about CPF investments, and if you should invest them in a turbulent market. Gregory Van, chief executive and founding partner of Endowus, the only digital investment adviser that now has a CPF investment option, gives us his views.

1. What is the difference between traditional CPF investment schemes and digital schemes? Are there hidden fees? (1:02)

2. In a turbulent market now worsened by the coronavirus threat, should you invest your CPF funds? (4:09)

3. CPF is your long-term money. How can it perform if you take a similar long-term market view versus just leaving it in CPF? (5:14)

4. Invest wisely, strategically, not tactically. Strategic investment means a long-term approach, whereas a tactical investment means trying to beat the market with constant changes. Find out the pros and cons of such approaches (9:29)

Produced by: Chris Lim and Lee Kim Siang

Edited by: Adam Azlee

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Do note: Any financial or investment information in this podcast is for use in Singapore only and is intended to be for your general information. Any particular investment or decision should only be made after consulting with a fully qualified financial adviser.

Thank you for your support! ST & BT Podcasts picked up a silver medal for Best Digital Project to engage younger and/or millennial audiences at 2019 Asian Digital Media Awards by Wan-Ifra: 

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