The environmental and economic impact of COVID-19 on Japan’s tourism industry

Fukuoka, Japan—It goes without saying that the tourism industry in Japan is booming. Walk around any major city and you’ll see people from all around the world enjoying the country’s food, culture, and hospitality. Naturally, the revenue generated by the industry has had a positive economic impact throughout Japan. However, between 2020 and 2022, the tourism industry was hit particularly hard due to the COVID-19 pandemic and subsequent travel restrictions. While the government implemented policies to support the industry, the full impact of the pandemic on the economy is still being studied.

Now, economists at Kyushu University have published new data on the economic, social, and environmental impacts of the COVID-19 pandemic on Japan’s inbound tourism industry. The report, published in the Journal of Industrial Ecology, presents data on the loss of yen, loss of employment opportunities, and reduction in CO₂ emissions from Japan’s tourism industry in 2020.

“I began this project when I was an undergraduate student in 2021, right in the middle of the pandemic. 2020 saw the loss of around 33 million tourists coming into Japan. My research interest was the tourism industry, so I started researching the impact of the pandemic and travel restrictions on the sector,” explains first author Yusuke Oga PhD candidate and JSPS Research Fellow at Kyushu University’s Graduate School of Economics. “I have also been researching how to make the tourism industry more sustainable. So, in this study, I also wanted to examine how the pandemic affected the industry's environmental impact.”

The team decided to focus on the year 2020, when the first travel restrictions were implemented. They first constructed a ‘counterfactual scenario,’ simulating the industry’s 2020 economic output if there had been no pandemic. This was then compared to the actual 2020 data.

Their analysis implemented an input-output analysis framework—a method that integrates the direct and indirect effects of the economy—into three factors: economic, social, and environmental. In addition, each factor was evaluated on three economic effects: direct, indirect, and income. Direct effects include industries directly affected by tourism, such as hotels, services, or the gift industry. Indirect effects refer to industries outside of the tourism industry that still play a major role, such as the energy industry or food producers and suppliers. Finally, income effects cover direct spending of the Japanese people from the money that comes into the tourism industry.

“Our analysis showed that the economic impact of the pandemic on the tourism industry was a loss of 3.44 trillion Japanese yen, or about 22 billion US dollars. The most affected industries were the food and beverage services like restaurants, hotels, and wholesalers,” continues Oga. “On the societal side it resulted in the employment declines for 868,976 people. The highest employment losses were also seen in restaurants and hotels.”

Their environmental analysis revealed a significant reduction in CO₂ emissions. The data showed that restrictions on inbound tourism resulted in a reduction of 11.6 megatons (Mt) of CO₂ emissions. In 2020, the average annual CO₂ emission of a Japanese household was 2.88 tons. 11.6 Mt is equivalent to the annual emissions of approximately 4 million households.

Professor Shigemi Kagawa, who led the study, explains that this new data can provide policymakers with a clearer view of the economics of the tourism industry and help them better prepare and focus the government’s support network should a crisis similar to COVID-19 occur in the future. Moreover, the environmental data shows that Japan should make efforts to promote sustainable tourism.

“Tourism in Japan will likely continue to grow, so we must consider its environmental impact. Finding the right policies and incentives will be difficult, but I think it is possible,” concludes Oga. “Our next step will be to analyze prefectural level data and see what differences there are locally. Additionally, this methodology can be applied to tourism data from other countries. I would be interested to see what the data looks like on global scale.”

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For more information about this research, see "Triple Bottom Line Analysis of the Decline in Foreign Tourist Demand in Japan due to the COVID-19 Pandemic: Counterfactual Structural Decomposition Approach," Yusuke Oga, and Shigemi Kagawa, Journal of Industrial Ecology, https://doi.org/10.1111/jiec.13615

Research-related inquiries

Shigemi Kagawa, Professor
Faculty of Economics
Contact information can also be found in the full release.