Watch Economic Observatory: Travel spending has "disappeared" due to COVID-19. With the Olympics postponed, a rapid recovery is expected from next year onwards.

Who could have predicted the situation we find ourselves in in 2020? Who would have thought that the COVID-19 outbreak that originated in Wuhan, China, would shake the world to this extent? However, we cannot remain pessimistic forever. Leading economic journalist Tomoyuki Isoyama looks ahead to the "post-coronavirus" era.

COVID-19 has wiped out travel spending. Expectations are high for a rapid recovery from next year onward due to postponement of the Olympics.

　The Tokyo Olympic and Paralympic Games have been postponed. The spread of the novel coronavirus (COVID-19) has spread worldwide, with deaths occurring one after another in European countries such as Italy and Spain. Germany has decided to close its borders, and many other countries and cities are "closing" their borders one after another.

Spread of infection and its impact on the economy

　Initially, Japan had the third highest number of infections after China and South Korea, but the rate of increase in infections subsequently slowed after Prime Minister Shinzo Abe decided to close all elementary, junior high, and high schools from March 2. However, concerns about a "second wave" emerged as young people who had visited Europe on graduation trips and other occasions in March continued to return and were confirmed to be infected, and on March 25, Tokyo Governor Yuriko Koike called for people to refrain from going out, saying that the country was at a "critical juncture for an infection explosion."

　The spread of COVID-19 has caused a tailspin in Japan's already depressed consumption. The biggest reason for this is the sharp decline in the number of tourists visiting Japan. This has resulted in a devastating decline in "inbound consumption," which had been supporting sluggish domestic consumption.

Disappearing inbound consumption

　According to estimates by the Japan National Tourism Organization (JNTO), 1,085,000 international visitors arrived in Japan in February. This is less than half the number from the same month last year, down 58.3%. The number of tourists from China fell 87.9% from 720,000 in February 2019 to 87,000 in February this year. This is due to the Chinese government's ban on group international travel. Even so, February only restricted entry to foreigners from Hubei Province, including Wuhan City. The Japanese government only tightened entry restrictions from China and South Korea on March 9th. While statistics are not yet available, it is certain that the number of visitors to Japan will continue to decline in March. The 220,000 visitors from Taiwan, 140,000 from South Korea, and 110,000 from Hong Kong that arrived in February will plummet sharply. Furthermore, April, the cherry blossom season, is typically the second-highest tourist arrival month after July, but it is almost certain that this too will see a devastating decline.

　"Inbound consumption," which has been driven by overseas tourists, will almost completely disappear. The Japan Department Stores Association announced that nationwide department store sales for February were 3661 billion yen, down 12.2% from the same month last year. Meanwhile, duty-free sales from purchases made by tourists visiting Japan who completed duty-free procedures at department stores totaled 11.02 billion yen, down 65.4% from the same month last year, a drop of one-third. Inbound consumption will likely "disappear" until the COVID-19 pandemic is over.

　Amid this, sales of high-priced items such as watches and jewelry, which have traditionally been supported by overseas tourists, have also been hit hard. Sales of "art, jewelry, and precious metals" at department stores in February fell 6.6% compared to the same month last year, a negative figure. Further declines are expected in March. With the opening of the Tokyo Olympics in July, it was expected that interactions with people from overseas would increase and inbound consumption would also increase.

　However, the sharp decline in international travel due to the spread of COVID-19 has also had an impact on watch sales. Looking at export figures by country and region for February published by the Federation of the Swiss Watch Industry, exports to mainland China fell by 51.5%, halving the figure, and China's monthly exports, which ranked third in the world in January, fell to ninth place. This shows that dealers have suddenly stopped imports.

　Exports to Japan, where it was originally expected that there would be a surge in inventory buildup ahead of the Olympics, fell 2.1%. Exports to the United States increased 17.8%, indicating a solid underlying trend in consumption up until that point, but with the spread of COVID-3 in the United States since March, watch consumption is likely to fall sharply.

Post-convergence economy

　However, for the Japanese economy, the clear one-year postponement may actually be beneficial, rather than forcing the Olympics to go ahead amid the COVID-19 pandemic and resulting in a lackluster event. To stem the economic contraction caused by COVID-19, the Bank of Japan and central banks around the world have implemented significant monetary easing measures, including negative interest rates. The government has also introduced cash handouts.

　If the financial system and economic society can hold their own without collapsing due to economic contraction, these economic measures could lead to a sudden overheating of the economy once COVID-19 subsides. This could even lead to the creation of a bubble. Some believe it will take a long time for international movement of people to return to normal, and some even say that globalization itself will begin to reverse. Predicting what the "post-COVID-19" period will be like is difficult, but there is hope that a brighter future awaits both companies and individuals who survive COVID-19.