Economic and Social Challenges
of COVID-19― Human, City and Economy ―March 2022

Economy and Society Study Group
Nakasone Peace InstituteKey Findings
The Novel Coronavirus that emerged in the spring of 2020 persists even today. Throughout FY2021,
the Economy and Society Study Group at Nakasone Peace Institute has been examining the situationfrom three perspectives: the impact on people, the impact at the city and regional levels, and the impact
at the macroeconomic level.
The messages from our study can be summarized as follows.
(1) Policy formulation should be based on scientific evidence.
The fact-finding survey conducted by our Study Group revealed that infection with the Novel
Coronavirus may occur through a variety of routes other than restaurants, including workplaces andcommuting. However, most of the actual social concern and policy responses have been related torestaurants. It is necessary to consider a framework in which accurate information, data, and objective
analysis on Novel Coronavirus infections can be shared socially through risk communication orutilized in policy.
(2) Along with physical health, a sense of well-being (a state in which physical, mental, and social
relationships are positive and harmonious) should also be emphasized.
Countermeasures against coronavirus infection tended to focus on the physical aspect of limiting
interpersonal contact. However, such measures themselves may increase social isolation andloneliness, leading to a vicious cycle of decreased well-being, which in turn leads to decreased physicalhealth, which again spirals to further decreased well-being. It is important to consider measures toalleviate the burden on people both physically and mentally.
(3) Resilience of economic and social activities should be ensured.
In response to external risks such as a Novel Coronavirus pandemic, after a risk and cost assessmentand from the perspective of crisis management, measures to maintain and continue basic functions
such as medical care and infrastructure, including preparations for normal times, should be consideredat the national, city, and regional levels.
(4) Urban, suburban, and rural urban functions should work together to find ways to solve problems.
In many cases, it is difficult for a single city or region to solve problems caused by macro changes
such as demographics, climate change, or globalization on its own. It is necessary for cities, suburbs,
and rural areas to share common social capital, including industrial infrastructure, data and information,and communities, and to enhance economic vitality overall by taking advantage of the decreasing
constraints of time and distance gained through digital transformation.

1(5) It is important to time the policy shift with an eye on the post-coronavirus period.
In response to the coronavirus pandemic, it is important to ensure that in the short term, temporary
employment adjustments and business crises do not remain as permanent damage in such forms as
long-term unemployment and corporate closures and bankruptcies. While Japan has succeeded tosome extent in achieving these policy goals, it cannot be denied that the policy may have a negative
impact on economic growth in the long run by restraining necessary employment mobility andpreserving companies that should exit the market. In the future, it is important to measure the timingof policy changes with an eye on the exit from the coronavirus pandemic.
(6) The impact of the coronavirus pandemic on income distribution should be assessed and necessary
policy measures should be taken.
In the current coronavirus shock, as in the Lehman shock period, non-regular employees have been
more severely affected by the crisis. Moreover, in the current crisis, non-regular employees in the nonmanufacturing sector, especially female non-regular employees who work mostly in the personal
services sector, have been the most affected, and there are concerns about issues in terms of income
distribution. It is necessary to identify these impacts at an early stage and take short-, medium-, andlong-term policy measures.
(7) Medium- and long-term issues should be identified and policy measures should be taken.
Japan's medium- to long-term challenges, such as population decline, fiscal reconstruction, social
security, and the lukewarm economy (an economy in which households do not actively consume
regardless of an increase in income and companies do not actively invest even when their profits
increase, making it difficult for the virtuous cycle of the economy to work), are becoming increasinglydifficult due to the coronavirus pandemic. In particular, the negative impact of a declining population
is likely to materialize earlier than previously assumed. To avoid future confusion, it is necessary toassess the impact of the pandemic on medium- and long-term issues, share the results with society,and apply them to macroeconomic policies and urban and regional policies.

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