Japan's travel promotion freeze viewed as costly

A move by Japan to suspend a controversial travel campaign could result in a $860 million hit to projected domestic spending over the prime New Year holiday period, researchers said.

Prime Minister Yoshihide Suga on Monday announced a temporary halt to the "Go To Travel" promotion, which had been conceived as a means to stoke consumer spending that was depressed by the coronavirus pandemic. The suspension will apply from Dec 28 to Jan 11.

Takahide Kiuchi, an economist at Nomura Securities, made the projection for the impact on domestic consumption resulting from the program's suspension over that period.

Kiuchi's fellow economist at Nomura, Masaki Kuwahara, said the move was negative for the economy.

"We had expected growth to stay barely in the positive reading, but now it's possible the economy will slip into negative territory," he told Bloomberg News.

On Wednesday, the Tokyo metropolitan government reported a single-day record of 678 infections, topping the previous high of 621 logged on Saturday. The surge in cases forced Suga to put virus containment ahead of the economy.

"We decided to take the utmost measures to stem the further spread of infections and reduce the burden on hospitals so that people will be able to welcome a calm and peaceful new year," said Suga.

But he insisted that travel "should not necessarily be blamed for the surge in cases".

However, many have criticized Suga for taking too long to suspend the travel promotion.

Yukio Edano, leader of Japan's Constitutional Democratic Party, said the government took the action too late, though added that the suspension of the campaign during the bumper New Year holiday period would be a huge blow to the tourism and restaurant industries.

In defending Suga, Yasutoshi Nishimura, the minister in charge of the nation's response to the coronavirus, said the decision was a painful one but that it "represented the best timing to reduce face-to-face interactions that could spread the virus".

"We will do everything we can to stop the spread of infections at an early stage," Nishimura said.

The sudden announcement on Monday also caught many would-be tourists off guard, with many booking companies facing a deluge of cancellations.

Agencies contributed to this story.