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The Impact of COVID-19 on Global Production Networks: Evidence from Japanese Multinational Firms

Connectivity, COVID-19, East Asia, global value chains, Japan

The Impact of COVID-19 on Global Production Networks: Evidence from Japanese Multinational Firms

Using aggregate-level data on Japanese multinational corporations (MNCs) in major host countries and regions, this paper investigates the impact of COVID-19 on global production and supply chains with a focus on East Asia. I use the numbers of COVID-19 cases and deaths as measures of the impact of the pandemic. I find that the pandemic had substantial impacts on the performance (sales, employment, and investment) of Japanese MNCs and global supply chains (exports to Japan and exports to third countries) in Q1–Q3 2020. China recovered quickly in Q2 and grew in Q3, whilst the countries of the Association of Southeast Asian Nations and the rest of the world had still not fully recovered in Q3 2020. Importantly, lockdown and containment policies in host countries had large negative impacts on the sales and employment of Japanese MNCs. In contrast, I did not find positive effects of economic support policies on firm performance. Interestingly, whilst the firm expectations and business plans of Japanese MNCs were negatively affected by the COVID-19 pandemic, their business confidence increased with strong overall government policy responses in host countries in Q1 2020.

This research was conducted as a part of the project ‘ERIA Research on Covid-19’ at the Economic Research Institute for ASEAN and East Asia (ERIA).

The Impact of COVID-19 on Global Production Networks: Evidence from Japanese Multinational Firms

Date

26 March 2021

Category

Connectivity , COVID-19

Author

Hongyong Zhang

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