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Economy

Japan's Suga to halt whole travel campaign as COVID surges

Prime minister's signature $12bn stimulus plan to be frozen over new year holidays

Japan, which has been boosting its COVID-hit economy by encouraging residents to travel, is about to shift its focus to slowing the virus's spread.   © Reuters

TOKYO -- Last week's record-breaking number of new COVID-19 infections has forced Japan's Prime Minister Yoshihide Suga to announce Monday the suspension of his entire signature $12 billion travel subsidy package over the country's new year holidays.

Suga said Monday evening he was halting the "Go To Travel" campaign from Dec. 28 to Jan. 11. The suspension of the campaign will take effect earlier in Tokyo and Nagoya, on top of extending suspensions already in place for Sapporo and Osaka, major cities that are recording high infection rates.

The move comes as a blow for Suga, who sought to balance the health of the population with boosting Asia's second-largest economy. But amid the resurgent virus and declining favorability numbers in recent opinion polls, he had been urged to respond more firmly to the outbreak.

The government has already asked people aged 65 and older and those with underlying health conditions to refrain from making trips to or from Tokyo using the campaign, until Thursday.

For now, those who are visiting Tokyo, Nagoya, Osaka and Sapporo will no longer benefit from promotions under Suga's travel campaign. Those who reside in the four cities are asked to refrain from traveling. The entire travel campaign will stop during the new year holidays.

Go To, with a budget of 1.3 trillion yen ($12.3 billion), covers 35% of travelers' accommodation costs and offers 15% discounts for restaurant dining and souvenirs.

Capped at 20,000 yen per person per night, the subsidy was used by 52.6 million travelers from when it started in July through November 15. Tokyo, which was facing a COVID wave at the time of the launch, had been excluded until Oct. 1. The capital and its 14 million inhabitants have since helped the program deliver an economic shot in the arm to the nation.

The campaign has been regarded as a key Suga administration policy to revitalize social and economic activities while also tamping down the virus's spread. The government has maintained a bullish stance on its continuation, as it fears scaling it down could lead to a weakening of the economy.

"Any further spread of infections must be avoided," Suga said on Friday during an online program, the day when a government panel advised the administration to freeze the campaign in areas experiencing high transmission rates. While also admitting that "Go To became bad before I knew it," Suga denied he was considering a temporary halt to the program.

But a surge in new confirmed cases has compelled Tokyo to shift its attitude. Japan on Saturday recorded over 3,000 daily cases for the first time, a number far beyond what the country was experiencing during its state of emergency in April and May.

Also on Saturday, Tokyo recorded its highest number of new daily cases, 621, and reported that the number of patients nationwide with severe symptoms was also at a peak, 578 patients. As of Dec. 8, five prefectures, including the capital, Osaka and Hokkaido, were at the worst of a four-level alert scale in terms of hospital bed availability.

Even with the generous subsidies, travelers have been shying away from the capital.

"Confirmed cases are increasing, but we can't see the virus," said Masaru Shirakawa, a manager at Tokyo-based Belmont Hotel. "Many are already avoiding visits to Tokyo."

Equipped with ballrooms and restaurants, the hotel's 82 rooms are usually packed during the year-end period as megastars hold concerts at the nearby Tokyo Dome. But this year, with many concerts being held online, only a third of its rooms have been booked for the period.

The Belmont's occupancy is now at about 20%.

When the ban on Tokyo was lifted on Oct. 1, the Belmont's occupancy jumped from less than 10%. It is now bracing for a wave of inquiries or cancellations. "These will soon happen as the government finalizes the decision," Shirakawa said quietly.

Other hotels are also bracing for the inevitable. Hiromichi Hashimoto, an owner of Nishi Shinjuku Green Hotel, which caters to business travelers, said average spending per customer has increased thanks to the campaign. But "it will decrease again," he sighed. "We also welcome many students taking entrance exams at nearby colleges in January. Online entrance exams will make it difficult for us."

In late November, right before Osaka and Sapporo were excluded from the program, Takahide Kiuchi, an executive economist at the Nomura Research Institute, noted the subsidies' health risks.

"The Go To Travel campaign," he said, "in which the government actively encourages people to travel, may distort rational judgment" about whether it is appropriate to travel, thus "increasing infection risks."

He also spelled out the risks to the economy should the campaign be curtailed.

If travelers from Tokyo, Osaka, Nagoya and Sapporo lose their access to the subsidies, he said, consumer spending would decrease by 34.7 billion yen per month, or an annualized 415.9 billion yen. "Negative economic effects are inevitable," he added, "but given the current infection situation, this is a reasonable measure."

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