Japan’s efforts to revive tourism industry not paying enough

The global travel and tourism industry is among the worst hit due to COVID-19 pandemic and deal activity in the sector is muted. Japan too is not an exception, though the country seems to be keen on reviving the industry by introducing new initiatives. However, with the resurgence of new COVID-19 cases and mixed response amid criticism and concerns over second wave of infections, deal making sentiment is expected to remain subdued for some more months, says GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Financial Deals Database reveals that the number of deals announced in the Japanese travel and tourism industry decreased by more than 50% in Q2 2020 compared to Q1. In a bid to revive COVID-19 battered domestic tourism industry, Japan rolled out a travel campaign on 22 July 2020. As part of the campaign, Japan unveiled ‘Go To Travel’ initiative, under which the government proposed to subsidize travellers’ expenses up to a maximum of JPY20,000 per day.

Aurojyoti Bose, Lead Analyst at GlobalData, says: “The ‘Go To Travel’ program is expected to run until March 2021. However, contrary to the assumption that the recent government initiatives will help in reviving the tourism industry as well as deal activity, they are drawing sharp criticism as key markets such as Tokyo and Osaka started registering new cases triggering fears of a second wave of COVID-19 infections.”

In addition, these programs saw several conflicts among the law makers. While the Japanese government is trying to run the campaign, some prefectures were found requesting postponement of the program or issuing advisory against travelling and imposing state of emergency.

For instance, the Governor of Tokyo, Yuriko Koike requested the government to postpone the program. The Governor also urged residents to refrain from travelling, which conflicts with the government’s strategy to promote tourism. However, the program was rolled out by excluding Tokyo. Similarly, Aichi Governor, Hideaki Omura imposed a state of emergency effective from 6 August.

Bose concludes: “With several prefectures continuing to report significant number of new cases, we may see more number of Governors imposing state of emergency. Though the Japanese government does show any signs of withdrawing the program, it may require to revisit its strategies to bring all Governors into confidence so that such programs become a success story while also minimizing the spread of the infection.”

Deal activity in Asia-Pacific up by 23.2% in July

However, deal activity in Asia-Pacific seem to be picking up slowly. A total of 2,037 deals were announced in the Asia-Pacific (APAC) region during July 2020, which is an increase of 23.2% over the 1,653 deals announced during the previous month, according to GlobalData.

An analysis of GlobalData’s Financial Deals Database reveals that the deal volume during the month remained above the first quarter (Q1) of 2020 and Q2 monthly average levels.

Aurojyoti Bose comments: “Deal activity in the region remained inconsistent since COVID-19 outbreak. However, the recent months have seen an uptick, which could be a positive sign. July marks the second consecutive month of growth in deal activity.” Deal activity also improved in most of the key markets such as China, Australia and South Korea, which witnessed increase in deal volume by 32.3%, 18.4% and 40.0%, respectively, compared to the previous month. But alongside Japan, Singapore too witnessed decline of 6.5%.

Bose explains, “China, Australia and South Korea were able to control the spread of COVID-19 effectively and regain confidence for deal making thereby witnessing an improvement in deal activity. Meanwhile increasing infection rate among migrant workers in Singapore in recent months is resulting in subdued deal activity.”