The coronavirus outbreak is posing myriad challenges for the Japanese economy, including a key Abe administration policy initiative — the promotion of inbound tourism.
In recent years, inbound tourism has been one of the few sectors to see rapid growth in the long-stagnant Japanese economy. Top government officials, especially Chief Cabinet Secretary Yoshihide Suga, have touted the country’s “exploding” inbound tourism as a successful example of their “structural reform” deregulation initiatives.
In fact, everything looked to be on track until recently. The number of foreign tourists skyrocketed from 8.36 million in 2012 to 31.88 million in 2019, largely thanks to the yen’s depreciation and Suga’s initiative to ease Japan’s visa conditions for tourists from other Asian countries, most notably China.
Total spending by foreign tourists in Japan likewise surged from an estimated ¥1.1 trillion to ¥4.8 trillion during the same period, with Chinese tourists spending as much as 36.8 percent of total tourism expenditures in 2019, followed by Taiwanese at 11.4 percent and South Koreans at 8.7 percent.
“It has been confirmed that the effects from inbound tourism … is turning into one of the main growth engines of the Japanese economy,” declared the Japan Tourism Agency in its 2018 white paper.
“By becoming a tourism-oriented country, we have created a large and robust industry that is driving regional revitalization throughout Japan,” Prime Minister Shinzo Abe boasted in his annual policy speech in January last year.
But that rosy vision of “a tourism-oriented country” has recently been put in doubt.
Since July, the number of South Korean tourists, typically the second-largest ethnic group among visitors, plummeted by more than 50 percent as nationalistic sentiment in both countries flared up over thorny history and trade issues.
In December, the number of tourists from the country who came to Japan stood at 248,000, down 63.6 percent from the same month in the previous year. Experts had already said it had become impossible for Abe’s government to meet its target of 40 million foreign tourists in 2020.
And then the coronavirus hit. Beijing has taken the extraordinary step to ban all Chinese from going overseas on group tours, effective Jan. 27. The number of Chinese tourists, the largest group by nationality, is expected to fall drastically as a result.
Some experts say the coronavirus crisis is likely to continue for several months, possibly affecting the Tokyo Olympics starting July 24 — a nightmare scenario for Abe, who has tried to use the world’s largest sporting event to promote the Japanese economy and thereby further drum up voters’ support for his government.
According to a simulation by a medical team led by Gabriel Leung, the dean of the University of Hong Kong’s faculty of medicine, the number of infections in five Chinese mega-cities — Beijing, Shanghai, Guangzhou, Shenzhen and Chongqing — would peak between late April and early May, meaning the crisis would still continue further beyond that period.
“The best case scenario, you would have something … where we go through the spring into the summer, and then it dies down,” David Fisman, a professor at the University of Toronto, was quoted as saying by media reports.
During an Upper House Budget Committee session Wednesday, Liberal Democratic Party member Motoyuki Fujii pointed out it took about six months to contain the SARS (severe acute respiratory syndrome) crisis in 2003, which was caused by a similar virus and infected about 8,000 people and killed 774 from Nov. 2002 to Aug. 2003.
The new coronavirus, which was first officially confirmed in Wuhan on Dec. 31, has already infected at least around 9,800 and killed 213, according to the tally compiled by the South China Morning Post as of Friday.
“I’m concerned. … Now we have exactly about six months before the Olympic Games will start in July,” Fujii said.
“I’d like the government to make its maximum efforts to get rid of the effects of the infectious disease by the time we will have the Olympic Games,” he added.
In response, Seiko Hashimoto, the minister in charge of the Olympics and Paralympics, said that “measures against infectious diseases including the new coronavirus are very important” in organizing the event.
“I believe safety and the sense of security must be ensured to make the Tokyo Olympics successful,” Hashimoto said.
It is still probably too early to predict any effects on the Tokyo Games, as many key details of the new coronavirus still remain unknown.
But the outbreak has also highlighted a legal loophole and Japan’s apparent unpreparedness to deal with serious outbreaks of infectious disease in general.
Medical experts were shocked to learn that a carrier of the novel coronavirus could infect others even during the incubation period, when no symptoms are apparent. However, under the law, quarantine officers are not allowed to force a person showing no symptoms to undergo a medical test to determine whether that person is a carrier of a designated infectious disease.
In fact, two Japanese citizens who arrived at Tokyo’s Haneda Airport from Wuhan on a government-chartered airplane Wednesday refused to be tested for the virus. They went home from the airport and did not stay at a housing facility prepared by the government.
“Two people have refused to undergo a virus test. We tried to persuade them for hours but there was no legally binding power. It’s very regrettable,” Prime Minister Shinzo Abe admitted during an Upper House budget committee session Thursday.
On the political front, a setback in the promotion of inbound tourism is likely to deal a heavy blow to Abe as he struggles to carve out a legacy for his administration, which began in December 2012. Abe’s term as the president of the ruling LDP will expire in September next year.
His Abenomics policy mix consists of three main components: ultraloose monetary easing by the Bank of Japan, aggressive fiscal spending by the government and structural economic reforms, most notably deregulation.
Many economists have regarded monetary easing and fiscal spending as temporary measures to buy time, given the ballooning central government debt.
Structural economic reforms, in particular deregulation, is the key to achieve sustainable growth, they say, and promotion of inbound tourism has been often pointed out as one of the few successful cases of Abe’s structural reform initiatives.
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