A recent Reuters poll reveals that the ongoing coronavirus outbreak driving a potential slowdown in global economic growth has worsened the mood among manufacturers in Japan. Based on BOJ’s quarterly Tankan survey, the poll indicates that business confidence among Japanese manufacturers is expected to flatline over the next three months.

The manufacturing sector and Japan’s economy have already been reeling under the effects of the prolonged trade tensions and the sales tax hike, and as their impacts were fading came news about the virus. China is one of Japan’s key trading partners and its economy is expected to be affected by the lockdown and dip in consumption, which will have a spillover effect on the Japanese economy as well.

While exports are expected to decline on account of the coronavirus outbreak, domestic consumption is also expected to remain weak following the sales tax hike. The Reuters Tankan sentiment index for the manufacturing sector stood at -5 for February, slightly better than the -6 reading for the previous month, however, continuing to indicate pessimism by staying negative for seven consecutive months.