Nishimura said Abe told him to “proceed swiftly with setting up the government task force” based on Kato’s report. But the government was not considering declaring a state of emergency at the moment, Nishimura said.

Under a law revised this month to cover the coronavirus, the prime minister can declare a state of emergency if the disease poses a “grave danger” to lives and if its rapid spread threatens serious economic damage.

Japan was teetering on the brink of recession before the virus struck and the epidemic has increased that risk.

A state of emergency would allow governors in hard-hit regions to take steps such as asking people to stay home, closing schools and other public facilities and cancelling large events.

Japanese shares tumbled on Thursday following three days of big gains after the rise in domestic coronavirus cases stoked worries of tougher domestic restrictions for social distancing.

Hitachi instructed 50,000 employees at its group companies in Tokyo to work from home and avoid unnecessary outings and a landmark department store in Tokyo’s Shibuya district – popular with young people, many of whom have continued to go out – said it would close on the weekend.

Tadashi Matsukawa, Tokyo head of fixed income investment at PineBridge Investments, said although people were panic buying in fear of a lockdown, they were unlikely to buy big-ticket items and some products might not be available anyway.

Tokyo’s cherry blossoms bring thousands to parks but experts worry the worst isn’t over yet

The decision to set up the task force – a necessary step to declaring an emergency – followed a sharp jump in coronavirus cases in Tokyo, making the capital the epicentre of Japan’s outbreak. Tokyo had at least 250 cases as of Thursday.

After being unable to trace an increasing number of cases, experts are worried about a surge in the community along with more infections from people returning from abroad.

On Wednesday, Tokyo Governor Yuriko Koike warned of the risk of an explosive rise in infections in the capital and asked residents to avoid non-essential outings until April 12, especially over the weekend. She repeated her call on Thursday.

“The government and local authorities will cooperate based on the awareness that this is a very critical time to prevent the spread of the virus,” Chief Cabinet Secretary Yoshihide Suga told a news conference.

Abe has bet heavily on Japan hosting the Games, casting them as a chance to showcase recovery after the 2011 earthquake, tsunami and Fukushima nuclear disaster, and delaying them would once have been seen as an “unthinkable political defeat”, said Tobias Harris, senior vice-president at consultancy Teneo.

The delay “removes a significant source of uncertainty for the administration and could give a bump to Prime Minister Shinzo Abe’s approval ratings, since large majorities support delaying the games,” Harris said.

Koike has asked the neighbouring prefectures of Saitama, Chiba and Kanagawa to ask their residents to refrain from non-urgent, non-essential travel to Tokyo, the Nikkei business daily reported.

The governor of Kanagawa, near Tokyo, later asked residents to stay at home this weekend.

Tokyo shares tumbled on Thursday, with the benchmark Nikkei dropping over 1,000 points at one point, as the capital and its neighbouring cities accelerated efforts to contain the new coronavirus, stoking fears of an economic slowdown.

The government has unveiled two emergency economic packages already and is expected to offer fresh stimulus in the coming weeks.

The economy, rather than the delay of the Olympics, is now the main pressure point on Abe, said Robert Dujarric, director of the Institute of Contemporary Asian Studies at Temple University’s Tokyo campus.

“I think that when we look at the post-mortem of Covid-19, the Olympics will be a minor footnote,” he said.

Abe has already told schools to close – although many are now preparing to reopen – and asked organisers to refrain from large-scale events, but his instructions had no formal legal basis.

Even if a state of emergency is eventually declared, experts noted there are no penalties for ignoring most of the local authorities’ instructions.

“The government of Japan is getting close to declaring a ‘state of emergency’ but even if so, no penalty for defying requests to stay home,” said Kenji Shibuya, director of the Institute for Population Health at King’s College, London.

A declaration would, however, put more pressure on people and businesses to obey.

On a sunny three-day break last weekend, crowds of people were out in Tokyo despite bans in some areas on picnics for the traditional spring hanami cherry-blossom viewing.

On Thursday, tabloids blared “Tokyo Lockdown Panic” and “Tokyo Destruction”.

But a long line of people waited at a chocolate croissant cafe in Tokyo for lunch, while subways were packed and people lined up before drug stores opened to buy masks and sanitary products that are in short supply.

Additional reporting by Kyodo, Agence France-Presse