Unmasking COVID-19 Restrictions: Analysing Their Impact on Japanese Tourism and the Economy

The COVID-19 pandemic had a profound impact on the global travel industry, leading to the implementation of stringent border controls and travel restrictions worldwide. Japan, like many other countries, took measures to contain the virus, resulting in significant disruptions to its tourism sector. These measures had far-reaching consequences, including a sharp decline in international visitor arrivals and restrictions on domestic travel, leading to reduced income for tourism-related businesses in popular destinations such as Kyoto, Tokyo, and Osaka.^[1] In this article, I focus on the impact of the pandemic on Japan’s tourism sector, analysing the changes in both inbound and domestic tourism and exploring their implications for the overall tourism economy. I look at three components: inbound tourism, domestic tourism, and tourism consumption.

The Importance of Tourism to the Japanese Economy

Tourism plays a vital role in Japan’s economy, serving as a significant source of employment in sectors such as hospitality, transport, retail, and entertainment.^[2] It contributes to balanced development by creating opportunities in rural areas. Tourism consumption captures the overall spending patterns of tourists, encompassing expenses on accommodation, transportation, dining, shopping, and entertainment within a destination. When tourists spend on these services, it stimulates local businesses, generates tax revenues, and contributes to Japan’s international trade balance by earning foreign exchange.^[3] The growth of the tourism industry also has positive effect on other sectors such as construction, transportation services, food production, retail, and entertainment, driving overall economic growth and creating more opportunities.^[4]

COVID-19 Restrictions and the Devastating Blow to Tourism

Pandemic restrictions disrupted Japan’s inbound tourism sector, which involves tourists visiting from outside the country. In response to the global situation, Japan closed its borders in January 2020, implementing strict measures to prevent the entry of individuals from affected regions.^[5] These measures included border closures, travel restrictions, and quarantine requirements, resulting in a substantial decline in inbound tourism.^[6] The Japan Tourism Agency (JTA) reported that the number of international visitors to Japan reached a record high of 31.88 million in 2019.^[7] However, as a consequence of the pandemic, this number dropped significantly to 4.12 million in 2020, a decline of 94%.^[8] In 2021, Japan only had a total of 246,000 visitors. Comparing the years 2019 to 2021, Japan’s inbound tourism decreased by 99.2%.^[9]

Tourism consumption by international visitors followed a similar trend. According to the JTA, in 2019, inbound tourism consumption amounted to JPY 4,813.5 billion.^[10] This figure dropped to JPY 120.8 billion in 2021, representing a near 100% decline.^[11] It is important to note that while international tourism is important to the country, before the pandemic (FY2018), it only made up 17.8% of the total travel consumption.^[12] This means that domestic tourism consumption by Japanese residents is the primary driving force behind the Japanese tourism industry.^[13]

Domestic tourism refers to residents travelling within their own country. This stimulates the local economy through expenditures on accommodation, transportation, and other tourism activities.^[14] While it could be argued that domestic tourism may have encountered relatively less disruption compared to inbound tourism, this industry still suffered. Domestic travel decreased by 96.6% from May 2019 to May 2020 and domestic tourism consumption shrunk almost by half from the pre-pandemic period.^[15]

Faced with these statistics, the Japanese government introduced the “Go To Travel” campaign on July 10, 2020, with the hopes of stimulating domestic tourism. This campaign offered financial support, which essentially discounted all domestic trips. However, this campaign excluded travel to and from Tokyo due to infection rates. The result of the “Go To Travel” initiative was a 50% increase in tourist flow across the country. The campaign was halted six months later, in December 2020, due to the persistence of COVID-19.^[16] In general, the reduction in inbound tourism and the slowing down of domestic tourism led to a decrease in tourism consumption, which drastically impacted Japan’s tourism sector.

Challenges to Businesses

The impact on tourism businesses has been equally devastating, with restrictions imposed on large gatherings and events to stop the spread of the virus.^[17] Since the onset of the pandemic, restaurants, bars, and entertainment venues had to adjust their operating hours or temporarily close to minimise social contact.^[18] Following suit, hotels, tourist attractions, and transportation services operated at reduced capacities.^[19] These restrictions were in place for more than two years and were only lifted on March 21, 2022.^[20] Many businesses filed for bankruptcy. By 2021 more than half of the bankruptcies in Japan’s accommodation sector were a consequence of the COVID-19 pandemic.^[21] At the same time, employees in the accommodation, restaurant and living related and personal services industry experienced high job losses along with wage decreases. In the accommodation industry, regular employee numbers dropped by 8%, while non-regular employee numbers declined by approximately 15%.^[22]

Lifting Restrictions and the Road to Recovery

Since late 2022, Japan gradually reopened its borders and started easing restrictions, leading to a revival of both inbound and, more importantly, domestic tourism. On April 29, 2023, Japan lifted all its border restrictions, paving the way for the full return of inbound tourism.^[23] This bore fruit, since in March 2023, tourism revenues in Japan reached about JPY 19.2 million.^[24] According to the Japan Centre for Economic Research (JCER), Japan’s GDP grew 1.8% in the month of February 2023, attributed to the recovery in tourism.^[25]

In line with this, the Japan National Tourism Organisation (JNTO) reported a total number of 1.95 million inbound tourist arrivals between February and April.^[26] In May 2023, the Japanese government downgraded the status of COVID-19 to flu-level.^[27] One estimate is that the recent downgrade can bring a JPY4.2 trillion boost to the Japanese economy.^[28]

The COVID-19 pandemic has changed Japan’s tourism industry. Since 2019, the country has experienced a decline in inbound and domestic tourism, tourism consumption, and overall business performance. While the pandemic measures and restrictions had negative consequences, they were crucial for containing the virus and prioritising public health and safety. The effects of the pandemic have prompted change and reflection in Japan’s tourism industry. The JNTO has identified key areas that need support in the tourism sector: sustainable tourism, digital transformation, future hotel operations, labour shortages, and enhancing sightseeing spots.^[29] Japan has also shifted its focus to hosting major MICE events (Meetings, Incentives, Conferences, and Exhibitions) and the Osaka 2025 World Expo to aid in industry recovery and growth.^[30] Despite the challenges, since the easing of restrictions and increased investment in tourism, Japan has witnessed bustling streets and packed tourist attractions. As the country continues its recovery efforts from the COVID-19 pandemic, there is hope that tourism will play a vital role in driving post-pandemic economic growth.