The Japan National Tourism Organization says last month saw the biggest decline in tourism numbers since 2011, when country was rocked by an earthquake, tsunami and nuclear disaster.
Chinese travel agencies stopped offering group tours to Japan at the end of January, and the Japanese government has banned people from the Chinese provinces of Hubei and Zhejiang since February.
Before the outbreak, Chinese visitors accounted for 30% of foreign tourists, and some retailers relied heavily on their custom.
Duty-free store operator Laox has closed four of its outlets and began offering voluntary redundancies last month. The company says 90% of its duty-free sales come from Chinese tourists.
The Sumitomo Mitsui Trust Research Institute is forecasting that the total drop in tourism numbers as a result of the virus will be 3.1 million this year. They also say tourist spending will fall by an estimated 492 billion yen, or about 4.5 billion dollars.
Those estimates were based on the economic impact of the SARS epidemic in 2003.
But the institute's Shun Ogishima says governments are coming up with much stricter measures to combat the new coronavirus than they did during the SARS outbreak. "The effect on tourism could become 1.5 to 2 times larger than our current estimate," he says.
In 2019, Japan received about 32 million foreign visitors from around the globe, setting a record for the 7th consecutive year. Authorities are targeting 40 million this year, with the Olympic and Paralympic Games helping to boost the number.
But that target now looks out of reach, as experts predict the pandemic will continue to affect tourism for some time.
The World Health Organization says the new coronavirus has now spread to 169 countries and territories, with over 200,000 confirmed cases as of Thursday.