Chapter

2

The Economies of Japan and Kansai:
A Retrospective and Outlook
Section 1
The COVID-19 Pandemic and Household Responses:
People’s Flow and Household Consumption
INADA, Yoshihisa; KINOSHITA, Yusuke; and NOMURA, Ryosuke
Sections 1 and 2 of this chapter describe in detail the adjustment process ofhouseholds and businesses from the COVID-19 disaster. In the first half of Sections 3 and 4, we outline the current state of the Economies of Japan and Kansai, respectively, and in the second half we present our economic forecasts for
FY2021 through FY2023.
Two years have passed since the outbreak of the COVID-19 pandemic, and as we approach the end of 2021, the movement of people is returning
to its pre-pandemic level, basking in a temporary sense of freedom from the
COVID-19 pandemic, while being acutely aware of the risk of a sixth wave of
infections and prolonged supply constraints. Japan’s economic recovery fromthe pandemic has not been smooth, and the degree of recovery has been slower
than that of other major countries.
As the possibility of a new variant (Omicron) pandemic increases, countries
around the world are rushing to provide booster vaccines. Based on the experience so far, even if the rapid spread of the new variant is inevitable, both thenumber of deaths and the condition of those infected are likely to be considerably less severe. This assumption is reflected in our forecasts for the economies
of Japan and Kansai. Other important assumption in our forecast is the rapid
increase in consumption due to the accumulation of forced savings by households, as well as the impact of supply constraints on production by companies.
Our forecasts were made while paying special attention to these factors.

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

97

(％)
40

Number of new infections: Right

Retail and recreation

Groceries and pharmacies

Consumption expenditure: YoY(Persons)
25,00030
1015,0000
10,000-10-20Part Ⅲ

20,00020

1 13 25 6 18 30 12 24 5 17 29 11 23 4 16 28 9 21 3 15 27 8 20 2 14 26 7 19 31 12 24 8 20 1 13 25 7 19 31 12 24 6 18 30 11 23 4 16 28 10 22 3
20/3

4

5

Figure 2-1-1

6

7

8

9

10

11

12

21/1

2

3

4

5

6

7

8

9

0

10 11

Infection situation and changes in people’s flow and consumption
expenditure

Note: shows seven-day moving average. Shaded areas indicate periods of a state of emergency.
Source: Open data by MHLW, the Family Income and Expenditure Survey by MIC and the Community Mobility
Report by Google LLC

The relationship between people’s flow and consumption has so far been analyzed in terms of transportation policies and trade area analysis for companies,
but the scope has been limited. After the start of the COVID-19 pandemic, statistical data became available as open data, so in this section, we analyze trends inpeople’s flow and household consumption by using people’s flow and other datain the COVID-19 Community Mobility Report by Google and high-frequency
data, such as on daily consumption, in the Family Income and Expenditure Survey by the Ministry of Internal Affairs and Communications (MIC).

Part Ⅳ

5,000

-30
-40

Part Ⅱ

Two years have passed since the start of the COVID-19 pandemic, and people’s
lifestyles have changed significantly. During this period, household consumption behavior has also changed significantly because people have been forced to
avoid the Three Cs (crowded places, close contact settings, and closed spaces)
to ensure thorough social distancing. Figure 2-1-1 shows the number of new
infections for COVID-19, people’s flow trends by purpose (retail and recreation,
groceries and pharmacies), and changes in daily consumption. In particular, under the first state of emergency in April 2020, individual consumption decreased
because people’s flow was sharply curtailed alongside the increase in the number of new infections. During the second and subsequent states of emergency,
there still seemed to be a close relationship between the number of new infections, people’s flow, and individual consumption, although it was not as clear as
during the first state of emergency.

Part Ⅰ

1. Insights from high-frequency data

98

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

The structure of this section is as follows. Subsection 2 summarizes all of
the four states of emergency that have been declared so far to confirm people’s
flow characteristics by purpose and time slot during these declaration periods.
In subsection 3, based on the analysis in the preceding subsection, household
consumption trends are discussed by item by dividing the pandemic period into
three phases. Of particular interest is household consumption trends during thestates of emergency. Subsection 4 estimates how much the GRP in the Kansai
region’s six prefectures decreased due to the decline in household consumption
during the periods of the first and second states of emergency. In addition, tomitigate the impact of the pandemic, the Go To Campaign project was implemented from late July 2020 with the aim of stimulating tourism demand, andsubsection 5 confirms the movements of related items in daily consumption.
Lastly, Subsection 6 describes the outlook for the future.

2. Declarations of a state of emergency and people’sflow(1) Declarations of a state of emergency
Following the start of the COVID-19 pandemic, various infection prevention
measures have been taken to reduce contact between people. The pillars of themeasures are as follows: 1) requests for commercial facilities (restaurants, department stores, theaters, etc.) and public facilities to suspend operations or
shorten business hours, 2) requests for people to refrain from going out unnecessarily, expecting them to exhibit voluntary restraint for outings, and 3)
encouragement of teleworking and staggered work hours.
Table 2-1-1 summarizes the restrictions imposed by the declarations ofstate of emergency. The first declaration of a state of emergency was issued forseven prefectures on April 7, 2020, which was expanded to all prefectures on
April 16. On entering May, it was decided to extend the declaration period to theend of May, but in prefectures where the infection situation had calmed down,
the declaration was lifted on May 14 and it was lifted nationwide on May 25.
Following the resurgence of the infections (the third wave) from November, thesecond declaration of a state of emergency was issued for Tokyo and three otherprefectures on January 8, 2021, and seven prefectures were added on January
14. Then the declaration was gradually lifted, and finally the Tokyo metropolitan
area’s state of emergency was lifted on March 21.
However, after lifting the second declaration of a state of emergency, thenumber of new infections increased again (the fourth wave) at a faster pace than
the third wave. As the situation in the medical care provision system became

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

April 25–June20, 2021

July 12–September 30, 2021

Request to
close schools

〇

×

×

×

Request tosuspendoperations

Entertainment
facilities, athletic
and amusement
facilities, theaters, commercial facilities, etc.

×Entertainment
facilities, athletic
and amusement
facilities, theaters, commercial facilities,
restaurants
serving alcoholic
beverages, etc.

Entertainment
facilities, athletic
and amusement
facilities, theaters, commercial facilities,
restaurants
serving alcoholic
beverages, etc.

Request to
shorten business hours

Restaurants
Restaurants(until 8 p.m.)(until 8 p.m.)(Serving alcoholic (Serving alcoholic
beverages: until
beverages: until
7 p.m.)
7 p.m.)

Restaurants notserving alcoholic
beverages(until 8 p.m.)

Restaurants notserving alcoholic
beverages(until 8 p.m.)

Encouragement to shorten business
hours

×

Entertainment
facilities, athletic
and amusement
facilities, theaters, commercial facilities, etc.
(until 8 p.m.)×Entertainment
facilities, athletic
and amusement
facilities, theaters, commercial facilities, etc.
(until 8 p.m.)

Request to
refrain fromholding events〇

×(Strict requirements must be
met to hold
events)××(Strict requirements must be
met to hold
events)Self-restraint
on going out

Going out unnecessarily

Going out unnecessarily(Strictly refraining
from going out
after 8 p.m.)

Going out unnecessarily(Strictly refraining
from going out
after 8 p.m.)

Going out unnecessarily(Strictly refraining
from going out
after 8 p.m.)

Restrictions
on commuting
to work

Encouragement
Encouragement
Encouragement
Encouragementof teleworkingof teleworkingof teleworkingof teleworking
and staggered
and staggered
and staggered
and staggered
work hours
work hours
work hours
work hours(70% teleworking (70% teleworking (70% teleworking (70% teleworking
target)target)target)target)Restrictions

Source: Compiled by the author.

tighter, the third declaration of a state of emergency was issued on April 25. In
the third declaration, stronger measures were applied compared to the second
declaration, such as requests to large-scale commercial facilities, entertainment
facilities, and restaurants, including those serving alcoholic beverages, to suspend operations. As a result, the number of new infections decreased, and thefourth wave moved toward convergence (Figure 2-1-1). So the government
lifted the third declaration of a state of emergency for nine prefectures excluding
Okinawa Prefecture on June 20. The state of emergency in seven prefectures

Part Ⅱ

January 8–March
21, 2021

Part Ⅲ

April 7–May 25,
2020

PeriodPart ⅠState of emergency periods and restriction details

Part Ⅳ

Table 2-1-1

99

100

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

such as Tokyo and Osaka was changed to the Priority Measures for Preventionof Infection Spread for the period from June 21 to July 111).
After that, to address the resurgence of infections (the fifth wave) by highly
infectious variants (the alpha and delta variants) and to secure the medical careprovision system, the fourth declaration of a state of emergency was issued inTokyo on July 12. In addition, it was decided to extend the period of the Priority
Measures for the Prevention of Infection Spread for the four prefectures (Saitama, Chiba, Kanagawa, and Osaka Prefectures) until August 22. Even so, thespread of infections did not stop, and the government additionally designatedseven prefectures as the target areas for the state of emergency for the period
from August 20 to the originally scheduled expiry of September 12, which waslater extended to September 30.
(2) Declarations of a state of emergency and people’s flow
Have the declarations of a state of emergency affected people’s flow? Next, we
will confirm changes in people’s flow during the periods of the declarations of astate of emergency by dividing people’s flow data into two types: i) by purpose
and ii) by time slot.
i) Changes in people’s flow by purpose
The COVID-19 Community Mobility Report by Google announced people’s flow
trends in six categories (retail and recreation, groceries and pharmacies, parks,transit stations, workplaces, and residential) (Table 2-1-2). The report shows
how visits (and lengths of stay) at these six places changed compared to thebaselines (the median values for the corresponding day of the week during the
5-week period Jan 3–Feb 6, 2020) using high-frequency daily data.
People’s flow trends change depending on calendar holidays (Golden Week,
summer vacation, consecutive autumn holidays, year-end and new year holidays, etc.), but the trends are also greatly affected by the infection situation andthe anti-infection measures (Figure 2-1-2).
As shown in Table 2-1-2, the places in the six categories above, except forparks with substantial people’s flow fluctuations, can be divided into the three
types: 1) places with decreased people’s flow due to the COVID-19 pandemic, 2)1) When infections surged once again after the second state of emergency was lifted, the Act
on Special Measures against Novel Influenza, etc. was partially amended on February 3,
2021, and the Priority Measures for Prevention of Infection Spread were newly implemented. The first issuance was on April 1 for Miyagi Prefecture, Osaka Prefecture, and Hyogo
prefectures, and each prefectural government designated the target municipalities and requested that the relevant businesses suspend operations and limit alcohol service hours.

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

Table 2-1-2

101

Place categories and target places

Category
Retail and recreation

Restaurants, cafes, shopping centers, theme parks, museums,
libraries, movie theatres, etc.

Groceries and pharmacies

Grocery stores, food wholesalers, fruit and vegetable markets,
luxury grocery stores, drug stores, pharmacies, etc.

Parks

Local parks, national parks, public beaches, marinas, dog parks,
plazas, gardens, etc.

Transit stations

Public transportation bases (eg subway, bus, train stations), transfer stations, etc.

Workplaces

Workplaces

Residential

Residences(Persons)
25,00020

20,0000

15,000-20

10,000

-40

5,000

-60

1 13 25 6 18 30 12 24 5 17 29 11 23 4 16 28 9 21 3 15 27 8 20 2 14 26 7 19 31 12 24 8 20 1 13 25 7 19 31 12 24 6 18 30 11 23 4 16 28 10 22 3
20/3

4

5

Figure 2-1-2

6

7

8

9

10

11

12 21/1

2

3

4

5

6

7

8

9

0

Part Ⅱ

Groceries and pharmacies
Workplaces

Part Ⅲ

Retail and recreation
Transit stations

10 11

Changes in the number of new infections and people’s flow bypurposeNote: shows seven-day moving average. Shaded areas indicate periods of a state of emergency.
Source: the Community Mobility Report by Google LLC

places with no significant change in people’s flow, and 3) places with increased
people’s flow. Retail and recreation, transit stations, and workplaces fall undertype 1), groceries and pharmacies under type 2), and residential under type 3).
Figure 2-1-3 shows the average people’s flow trends during each declaration period for the above three types. Looking at this figure, retail and recreation,transit stations, and workplaces categorized as type 1 (places with decreased
people’s flow) showed a significant drop in people’s flow under the first stateof emergency, but the decline rate gradually declined during the second andsubsequent states of emergency, alongside the diminished effects of restraint
on going out as people became accustomed to the pandemic and the states of
emergency.
Next, groceries and pharmacies categorized as type 2 (places with noPart Ⅳ

Number of new infections: Right
Parks
Residential(%)
40

Part Ⅰ

Source: the Community Mobility Report by Google LLC

102

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook
(%)
20

13.9

10

-1.8

0
-10
-20

-18.1

-15.8

-30

3.3
-14.6 -17.1 -3.9

-13.4
-31.2

-50

8.1

-15.5

-27.9

-47.0
4th

3rd

2nd

1st

4th

3rd

2nd

1st

4th

3rd

2nd

Stations

1st

Transit

4th

3rd

2nd

1st

4th

3rd

2nd

1st

Retail andRecreation

Figure 2-1-3

7.4
7.4

-27.9 -26.4-40 -31.5-60

6.2

Workplaces Grocery and Residential
Pharmacy

Changes in people’s flow during each state of emergency period

Source: the Community Mobility Report by Google LLC

change) experienced no significant change in people’s flow under the first stateof emergency, while people’s flow decreased under the second state of emergency. It is considered that consumers hoarded medical supplies due to productshortages during the first state of emergency, but since the supply shortages
were resolved thereafter to some extent, people refrained from going out during
the second period. The effects of the restraint on going out diminished during
the third and fourth emergencies.
Lastly, residential categorized as type 3 (people’s flow increase) saw an increase in people’s flow (length of stay) to places of residence during the first
period because people in households refrained from going out. People’s flow toplaces of residence also increased during the second and third periods, but theflow of people’s rate was lower compared to in the first period as people started to go out more. The number of new infections hit a record high due to thehighly infectious delta variant during the fourth emergency period. Comparedto the second and third periods, people’s flow to places of residence somewhat
increased as people in households refrained from going out, fearing the risk ofinfection.
Summarizing the above, it can be said that the effects of refraining from going out were generally large during the first state of emergency, but the effects
gradually diminished from the second state of emergency onwards.
ii) Changes in people’s flow by time slot
Next, we will confirm the mobile population by time slot. Figure 2-1-4 and Figure 2-1-5 show the percentage changes in the mobile population by time slot
compared to in the same week of 2019 nationwide and in the Kansai region’s six

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption(%)

14 to 18

6 to 940

18 to 20103

20 to 24

20
0
-20
-40
-60

2) According to the Worker Awareness Survey by the Japan Productivity Center, the teleworking rate of companies has been declining: 31.5% (May 2020), 20.2% (July 2020), 18.9% (October 2020), 22.0% (January 2021), 19.2% (April 2021), and 20.4% (July 2021). Thus, people’s
flow reduction effects on companies have diminished.

Part Ⅱprefectures.
When looking at nationwide trends in Figure 2-1-4, people’s flow was reduced in all time slots under the first state of emergency. On the other hand,during the second state of emergency, although people’s flow after 18:00 was
reduced, the reduction effect in the early morning and daytime time slots wasdiminished. This is because as seen in Table 2-1-1, unlike the first declaration when requests to suspend operations were widely made for entertainment
facilities, schools, etc., measures under the second state of emergency weremainly to restrict the nighttime operations of restaurants with a high infection
risk, while entertainment facilities where a large number of people gather inthe daytime were only requested to shorten their business hours. In addition,
people’s flow between 6:00 and 9:00 (the commuting time slot) also increased
from the first declaration, which shows that the people’s flow reduction effectwas diminished2). In the third declaration, people’s flow after 20:00 somewhat
decreased compared to the second declaration as a result of the strict restrictions, including requests for restaurants serving alcoholic beverages to suspend
operations and requests for facilities such as department stores and theaters toshorten their business hours, but no significant change was seen in other time

Part Ⅲ

Note: Orange shaded areas indicate periods of a state of emergency. Yellow shaded areas indicate periods ofdesignated areas for pre-emergency measures.
Source: V-RESAS by Cabinet OfficePart Ⅰ

21/Oct/2w

21/Sep/4w

21/Sep/1w

21/Jul/4w
21/Aug/2w

21/Jul/1w

21/Jun/2w

21/Apr/5w

21/May/3w

21/Feb/4w

21/Mar/3w
21/Apr/2w

21/Jan/2w

21/Feb/1w

20/Dec/4w

20/Dec/1w

20/Oct/4w

20/Nov/2w

20/Oct/1w

20/Sep/2w

20/Jul/5w
20/Aug/3w

20/Jul/2w

20/Jun/3w

20/May/4w

Changes in the mobile population nationwide by time slots

Part Ⅳ

Figure 2-1-4

20/May/1w

20/Mar/4w
20/Apr/3w

20/Mar/1w

20/Jan/4w

20/Feb/2w

20/Jan/1w

-80

104

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

slots. From late July, people’s flow after 20:00 increased compared to during thethird state of emergency, and there were concerns about resurgence of infections. In the fourth state of emergency, people’s flow gradually decreased dueto the measures taken, such as requests to refrain from visiting crowded places
in target areas and limits on the number of people permitted at large-scale commercial facilities where clusters (groups of infected people) occurred frequently.
Next, we will check people’s flow in the Kansai region’s six prefectures (Figure 2-1-5). This figure shows that people’s flow decreased in the same way as
nationwide people’s flow in all time slots during the first state of emergency, but
the rate of decline after 18:00 was smaller than the national rate. The same phenomenon was observed during the second state of emergency. During the thirdstate of emergency, people’s flow decreased to the same level as national people’s flow3). After that, the Priority Measures for Prevention of Infection Spread
were implemented but the effects were limited, and people’s flow increased
again. However, in the fourth emergency, people’s flow decreased significantly
compared to the national level, partly because Osaka Prefecture requested thatdepartment stores halve the number of visitors to the basement food floor.
(%)

14 to 18

6 to 940

18 to 20

20 to 24

20
0
-20
-40

Figure 2-1-5

21/Oct/2w

21/Sep/4w

21/Sep/1w

21/Jul/4w
21/Aug/2w

21/Jul/1w

21/Jun/2w

21/Apr/5w

21/May/3w

21/Feb/4w

21/Mar/3w
21/Apr/2w

21/Jan/2w

21/Feb/1w

20/Dec/4w

20/Dec/1w

20/Oct/4w

20/Nov/2w

20/Oct/1w

20/Sep/2w

20/Jul/5w
20/Aug/3w

20/Jul/2w

20/Jun/3w

20/May/4w

20/May/1w

20/Mar/4w
20/Apr/3w

20/Mar/1w

20/Jan/4w

20/Feb/2w-80

20/Jan/1w-60

Changes in the mobile population in the Kansai region’s six
prefectures

Note: Orange shaded areas indicate periods of a state of emergency. Yellow shaded areas indicate periods ofdesignated areas for pre-emergency measures.
Source: V-RESAS by Cabinet Office3) The Ministry of Health, Labour and Welfare’s COVID-19 Advisory Board Data Analysis
Team (2021) reported that in Osaka Prefecture, the second state of emergency and priority
measures did not reduce the de-facto population, but the third state of emergency contributed to the reduction in the de-facto population in all time slots. In addition, Komaki (2021)
showed that during the third state of emergency, the effects of the restraint on going out
were higher in metropolitan areas where stronger requests were made.

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

105

(%)
60.0

Total expenditure on
goods and services
Goods expenditure
total

40.0
20.0

Durable goods

Semi-durable goods

0.0

Non-durable goods
Services

-20.0
-40.0
-60.0

1

2

3

4

5

6

7

8

9 10 11 12 1

2020

Figure 2-1-6

2

3* 4* 5* 6* 7* 8* 9*
2021

Changes in expenditures by category (nationwide)

Note: *relative to the same period of 2019.
Source: the Family Income and Expenditure Survey by MIC

4) Consumption expenditures in the Family Income and Expenditure Survey include pocket
money (of which, the detailed uses are unknown), social expenses, and remittance. The
analysis here was made based on expenditures on goods and services excluding these
items.

Part Ⅱ
Part Ⅲ(1) The initial outbreak and the declaration of a state of emergency
period: January–June 2020
Looking at Figure 2-1-6, we see that in March 2020 when the number of new
infections of COVID-19 increased, services expenditure, such as on food (mainly dining out) and package tours, decreased significantly because many people
started to stay at home (decrease in face-to-face services expenditure). Expendi-

Part Ⅳ

As seen in Figure 2-1-1, changes in people’s flow to commercial facilities, suchas retail and recreation and groceries and pharmacies, are closely related to people’s consumption trends. Next, we will discuss changes in household consumption and characteristic expenditure items by dividing the COVID-19 pandemic
period into three phases—the initial outbreak and the declaration of a state of
emergency period (January–June 2020), the recovery period after hitting bottom (July–December 2020), and the resurgence period (January–September2021)—based on the daily household consumption data from the Family Income
and Expenditure Survey by the MIC, while taking into account the analysis of
the people’s flow data in the preceding subsection (Figure 2-1-6, Figure 2-17)4).

Part Ⅰ

3. Declarations of a state of emergency and household
consumption

106
(%)
20.0

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook
Total expenditure on
goods and services
9.5

0.0

-20.0

Goods expenditure total

Durable goods-60.0

Non-durable goods

Services

16.4

6.7

1.2

-1.1

-5.7

3.9

-2.1
-7.6

3.2

5.1

-11.0 -12.9
-17.5

-13.3

-15.6

3.2
-2.6

-5.3

-23.7
-40.0

Semi-durable goods

-25.5

-36.7

-30.6

-49.9
1st: 20/4/7 ～ 5/25*

Figure 2-1-7

2nd: 21/1/8 ～ 3/21**

3rd: 4/25 ～ 6/29*

4th: 7/12 ～ 9/30*

Changes in expenditures by category during the periods of thedeclarations of a state of emergency (nationwide)

Note: *relative to the same period of 2019. **relative to 2020/1/8-2/28, 19/3/1-21.
Source: the Family Income and Expenditure Survey by MIC

ture on semi-durable goods such as clothes also decreased. On the other hand,due to rising demand from people staying at home, expenditure on durable
goods such as game consoles and software increased.
Goods and services expenditures decreased by 15.6% year-on-year since thefirst declaration of a state of emergency on April 7 (Figure 2-1-7). While goods
expenditure showed only a slight decrease by 1.1% year-on-year, services expenditure significantly dropped by 49.9% year-on-year. Expenditure on non-durable goods increased by 6.7% year-on-year due to an increase in demand forhome-cooked meals, but expenditure on semi-durable goods, consisting mainlyof non-essential items such as clothes, significantly decreased by 36.7% yearon-year. Also, a noteworthy characteristic is that expenditure on durable goods
such as TVs and personal computers increased by 9.5% year-on-year due to increased demand from people staying at home and teleworking.
In June, the rate of decline of goods and services expenditures decreased.
This can be attributed to the normalization of economic activities following thelifting of the declaration of a state of emergency on May 25 nationwide and thepent-up demand generated by special cash payments and the last-minute demand before the expiry of the cashless consumer return project that boosted
consumption. When looking at expenditures by item, a characteristic is that
expenditure on durable goods increased significantly due to the provision of
special cash payments.
(2) Recovery period from the bottom: July–December 2020
Next, we confirm the amount of expenditure on goods and services for July–De-

(3) Resurgence period: January–September 2021
Finally, we will look at the consumption trends from January to September 2021
(Figure 2-1-6).
In January, services expenditure decreased, impacted by the shortened
business hours due to the reissue of the state of emergency and the suspensionof the Go To Travel Campaign. Although still under the state of emergency, inFebruary people’s flow increased as the number of new infections decreased.
Although the impact of restraint on going out seemed to have been mitigated,the decline rate of consumption was larger compared to in February 2020 that
had one more day as it was a leap year.
The data for March and subsequent months were compared to the data of
two years ago when there was no negative impact of COVID-19. The decline
rate in services expenditure was mitigated in March and April with an increasein people’s flow, but the decline became larger again in May and June due tothe declaration of the third state of emergency on April 25. Goods consumption5) According to the Additional Table for MIC’s Family Income and Expenditure Survey, hotel
charges in October 2020 increased by 31.8% year-on-year.

Part Ⅱ
Part Ⅲ

cember 2020 (Figure 2-1-6). This period is positioned as the recovery period
after the first state of emergency.
In July, the decline rate of household consumption increased from the previous month due to the end of the pent-up demand generated by special cash
payments and the reactionary decline in demand following the expiry of the
cashless consumer return project. In August, the decline rate of services expenditure, such as recreation and dining out, slightly increased from the previous
month due to people’s restraint on going out amid an increase in the number of
new infection cases (the second wave of infections).
It is difficult to judge the results for September and October because there
was last-minute demand in September 2019 prior to the consumption tax hikeand a reactionary decline in October 2019. Looking at Figure 2-1-2 above, it
seems that people’s flow recovered with the improvement in the infection situation, which somewhat mitigated the consumption decline. Also, thanks tothe policy support, such as the Go To Campaign project, services expenditure,
whose recovery was delayed compared to goods expenditure, showed somesigns of picking-up5).
Since mid-November, semi-durable goods and services expenditures declined due to people’s restraint on going out with the resurgence of infections.
The decline rate of services expenditure increased in December.

Part Ⅰ107

Part Ⅳ

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

108

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

showed a relative recovery, but service consumption remained weak, as it faced
strong downward pressure due to the fourth declaration of a state of emergency
on July 12.
We will also look at the trends in goods and services consumption expenditures during the three state of emergency periods (Figure 2-1-7). Total goods
and services expenditure decreased by -15.6% year on year during the first stateof emergency, but the impact remained relatively minor at -5.7% during the second and -5.3% during the third state of emergency. Then during the fourth stateof emergency when the number of infections increased sharply, the decline rateof total goods and services expenditure increased to -11.0%. Services expenditure recorded a large decline of -30.6%, though not as large as during the firststate of emergency.

4. Estimating economic losses caused by the declarationsof a state of emergency
In the previous subsection, we estimated the impacts of the states of emergency
on household consumption based on daily data. During this period, households
were forced to reduce non-essential consumption among their consumption expenditure items by refraining from going out, etc. In this subsection, we will lookat the calculations of the impacts on household consumption in each prefecturein the Kansai region caused by the declarations of a state of emergency by focusing on non-essential consumption.
Below, we will first confirm the declines in household consumption during
the two state of emergency periods based on the non-essential consumption decline estimation flow in Inada, Kinoshita, and Nomura (2021). Then, based onthat information, the levels of consumption decline in each prefecture in Kansai
will be estimated.
(1) Consumption decline estimation flow
As described in Figure 2-1-8 Non-essential consumption decline estimation
flow, the ultimate decline in non-essential consumption is estimated by multiplying the base household consumption as the benchmark by the three parametersof (1) non-essential consumption ratio, (2) decline rate, and (3) period6). These
three parameters are explained below.

6) See Inada, Kinoshita, and Nomura (2021) for detailed estimation methods.

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

BenchmarkConsumption
ratio

Decline rate
・non-essential
consumption
decline rate
[2]

Period・Basehouseholdconsumption

・non-essential
consumption
share of thetotal [1]・State of
emergency
period [3]Figure 2-1-8

Non-essential consumption decline estimation flow

109

Decline in
consumption
・Decline inhouseholdconsumption
during thestate ofemergency

7) Basic expenditures here are regarded as daily necessities, mainly including food, rent, utilities, and health and medical services. Selective expenditures are regarded as expenditures
on luxury goods, including household appliances, durable goods for education and recreation, clothing, monthly fees, etc.

Part Ⅱ
Part ⅢPart Ⅳ(2) Non-essential consumption and parameter explanations
The Family Income and Expenditure Survey by the MIC classifies expenditure
items into basic expenditures and selective expenditures7). Under the states of
emergency, it is assumed households reduce non-essential consumption among
their selective expenditures.
The share of non-essential consumption (full year 2019) to the total goods
and services expenditure (the first parameter) was 29.3%. The point to focus onhere is how much non-essential consumption, which accounts for less than 30%
of household consumption expenditure, was actually reduced by the declarationof a state of emergency.
Table 2-1-3 shows the decline rates of non-essential household consumption (the second parameter) from the daily data of consumption expenditurefrom the Family Income and Expenditure Survey.
The total decline rate during the first state of emergency was -41.1%, but the
decline rates were very high for some items, such as public services (-91.8%),
entertainment (-73.1%), and dining out (-68.0%). While semi-durable goods also
showed a decline of about 40%, expenses for durable goods increased (+9.4%)
probably due to demand from people staying at home. During the second stateof emergency, the total decline was -19.7%, a reduction by half from the first time.
Above all, expenditure on durable goods turned to a decline, which is consistent
with the people’s flow trends (residential) (see Figure 2-1-3 above).
Finally, the state of emergency periods as the third parameter assume people in the three prefectures in the Kansai region, and the estimations were madefor the first period of 44 days from April 7 to May 21, 2020, and the second period

Part Ⅰ

Source: Compiled by the author.

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Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

Table 2-1-3

Non-essential consumption decline rate comparison(Unit: JPY, %)Item

Item of expenseFirst SoE
(20/4/7～5/25)

Second SoE(21/1/8～3/21)

Expenditure YoY change Expenditure YoY changeCars, household electric appliDurable goods
ances, furniture, etc.

18,5749.4

30,937-2.1

Semi-durable
goods

Clothes, bags, jewelry, etc.

17,983-41.3

37,161-11.2

Non-durable
goods

Food, consumables, etc.

10,013-3.4

13,592-1.1

Public services

Rail fares, highway fares, etc.

392

-91.8

1,890

-65.4

Dining out

6,247

-68.0

15,642-39.5

Travel fees, facility admission
materials, monthly fees, etc.

5,972

-73.1

14,733-41.8

Dining out
Entertainment
OthersParking fees, rent-a-car fees, etc.
Total

6,081

-5.1

9,927

-5.3

65,263-41.1

123,882-19.7

Source: Estimated by the author.

of 45 days from January 14 to February 28, 2021.
The benchmarks for the consumption decline estimations are nominal private household final consumption expenditures for FY 2019 in Kansai takenfrom Prefectural Economic Calculations (Cabinet Office). Since the FY 2018 figures are the most recent, advanced estimations of real gross regional products(GRP) in Kansai prefectures by APIR were used to estimate the FY 2019 nominal
private household final consumption expenditures8).
(3) Consumption decline estimations in Kansai
Based on the three parameters examined above and the benchmark household
consumption expenditures, household consumption declines in the Kansai region’s six prefectures during the two states of emergency were estimated (Table 2-1-4).
The household consumption decline in the Kansai region’s six prefecturesdue to the first state of emergency was JPY 714 billion and the ratio relative tonominal GRP was 0.9%. The household consumption decline due to the second
state of emergency is estimated to be JPY 350 billion and the ratio relative tonominal GRP 0.4%.

8) See Section 4 in this chapter for advanced estimations for the Kansai prefectures.

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

Table 2-1-4

111

Consumption decline due to the state of emergency

Hyogo

Kyoto

Consumption
decline

3,193

1,877

888

5,959

455

450

276

7,140

Composition ratio

44.7

26.3

12.4

83.5

6.4

6.3

3.9

100.0

Relative to nominal
GRP (FY2020)

0.8

0.9

0.9

0.9

0.7

1.2

0.8

0.9

Consumption
declineSecond SoE(21/1/14 Composition ratio～2/28)
Relative to nominal
GRP (FY2020)

Shiga

Nara

Wakayama

Kansai(6 pref.)

1,565

920

435

2,921

223

221

135

3,500

44.7

26.3

12.4

83.5

6.4

6.3

3.9

100.0

0.4

0.4

0.4

0.4

0.4

0.6

0.4

0.4

Note: nominal GRP for FY2020-estimations by APIR
Source: based on Prefectural Economic Calculations (Cabinet Office) & KEIQNo.54(APIR)

5. The Go To Campaign and household consumption
In Japan, the number of new COVID-19 infections increased from March 2020,
and the movement to refrain from going out spread, which reduced household
consumption. In particular, the first state of emergency had the most serious
impact on expenditure on recreational services, including accommodationand package tour fees. Therefore, the government implemented the Go To
Campaign project in late July with the aim of supporting the travel, tourism,
event, entertainment, restaurant, and other related industries, whose sales had
dropped sharply due to the COVID-19 pandemic9).
In this subsection, we will confirm expenditures for major expense items
related to the Go To Travel Campaign that is part of the Go To Campaign project. Since the economic spillover effects of the Go To Travel Campaign are discussed in Chapter 4, Section 5, the main expense items from the Family Income
and Expenditure Survey by the MIC are confirmed here.
Figure 2-1-9 shows the year-on-year changes in the total expenditure on
goods and services, expenditure on recreational services10), and travel expenditure consisting of accommodation and domestic package tour fees in the Family
Income and Expenditure Survey.
This figure shows that the decreases in recreation services expenditure9) The contents of the Go To Travel Campaign project are described in detail in Chapter 4,
Section 1.
10) Recreational services expenditure includes accommodation and package tour fees, as wellas admission fees to cultural establishments and amusement parks.

Part Ⅱ

Osaka

Part ⅢFirst SoE
(20/4/7～5/21)

Item

Part Ⅳ

PeriodPart Ⅰ(Unit: JPY 100 million, %)Kansai(3 pref.)

112

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook(%)
40

Number of new infections: Right

Total expenditure on goods and services

Recreational services

Accommodation services and Package tours(Persons)
4,000

20

3,500

0

3,000

-20

2,500

-40

2,000

-60

1,500

-80

1,000
500

-100
-120

1 8 15 22 29 5 12 19 26 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27
Mar/2020
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

Figure 2-1-90Number of new infections and Accommodation services andPackage tours

Note: shows the seven-day moving average
Source: Open data by MHLW, the Family Income and Expenditure Survey by MIC

and travel expenditure were greater than that of total expenditure on goods andservices, but that the rates of decrease gradually declined after the end of Julywhen the Go To Travel Campaign started, and finally turned positive on a yearon-year basis in late October. In the background to this is the fact that from
October 1, the Campaign started to cover trips to and from Tokyo and to issue
regional common coupons that can be used at travel destinations. Since the Go
To Travel Campaign offers a 35% discount on accommodation fees charged byaccommodation facilities, a characteristic is that travel expenditure, consistingof accommodation and domestic package tour fees, showed a larger growth rate.
After that, the Go To Travel Campaign was suspended due to the increase in thenumber of new infections. Although the Campaign partially supported service
consumption, its effect seems to have been limited except for in the first half ofOctober.

6. Future household consumption
When considering future household consumption trends, the following two
points need to be taken into consideration: vaccination status and wage trends.
With regard to the vaccine rollout in Japan, advance vaccinations for medical professionals were started on February 17, 2021, and priority vaccinations
for people aged 65 and older were started on April 12, 2021. After that, largescale vaccination programs in urban areas and occupational vaccination programs accelerated the vaccination speed. As of the time of writing this reportin November 17, 2021, Japan had surpassed Canada and reached the highest
vaccination rate among the G7 countries of 78.7% for the first dose and 75.5%

References
INADA, Yoshihisa; KINOSHITA, Yusuke; and NOMURA, Ryosuke (2021),
Impact of the reissue of the state of emergency on the Kansai economy—
Reflection and analysis using high-frequency and big data (Japanese title:
Kinkyu Jitai Sengen Saihatsurei no Kansai Keizai eno Eikyo – Kohindo Big
Data o Mochiita Furikaeri to Bunseki), APIRTrendWatch No. 72, January
26, 2021 (https://www.apir.or.jp/research/9215/).
KOMAKI, Yasuyuki (2021), Restraint on going out under the Covid-19 pandemic—people’s voluntary restraint and business restriction requests forrestaurants (Japanese title: Covid-19 ni Okeru Gaishutsu Yokusei – Hitobito
no Jihatsuteki na Yokusei to Inshokuten eno Eigyo Jishuku Yosei), NLI Research Institute (Basic Research Report), June 10, 2021
Ministry of Health, Labour and Welfare’s COVID-19 Advisory Board Data Analysis Team (2021), Quantitative evaluation of the effects of priority measures11) Coronavirus (COVID-19) Vaccinations, by Our World in Data.

Part Ⅱ
Part Ⅲfor the second dose11). Vaccination is expected to increase the people’s flow andpromote consumption, leading to economic recovery. In particular, consumption expenditures mainly in the consumption of face-to-face services, such asrecreation, dining out, accommodation services, and package tours, as well as
semi-durable goods, such as clothes, that have been suppressed so far are expected to increase.
On the other hand, possible risk factors include the resurgence of infections(the sixth wave) of COVID-19, wage trends, and rising prices of daily necessities. The spread of infections has placed strong downward pressure on both
wages and employment, especially for women working in face-to-face services
or irregular jobs, leading to a severe household income environment. As described in Section 2 of this chapter, corporate performance is recovering mainlyin the manufacturing industries, but it continues to deteriorate in the non-manufacturing industries. In the 2021 spring wage negotiations, many companies decided not to raise basic wages due to the deterioration of corporate performancein the previous year. Although companies with improved business performanceare expected to raise basic wages, it may be difficult for companies and industries with poor business performance to do so. If the pace of wage increases
slows, the pace of recovery of individual consumption will remain modest. In
the current environment where prices of daily necessities such as gasoline keep
on rising while wage increases are delayed, there is a concern that cost-pushinflation will spread and adversely affect the purchasing power of households.

Part Ⅰ

113

Part Ⅳ

Section 1 / The COVID-19 Pandemic and Household Responses: People’s Flow and Household Consumption

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Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

and declarations of emergency to prevent the expanding infection on theepidemic dynamics of COVID-19 (provisional version), National Institute of
Infectious Diseases, June 14, 2021.