Goldman Hints Tokyo Exclusion Hurts Japans New Tourism Program

A new program from Japan‘s government to help prop up the country’s ailing tourism industry will pack less punch because Tokyo residents have been excluded from using the subsidies, according to Goldman Sachs Group Inc.

Japan‘s “Go To Travel” program starting Wednesday will inject about 20% less into the tourism industry now that residents of the country’s richest and most populous city have been excluded from using its discounts on train tickets and hotels, economist Naohiko Baba wrote in a note to clients Tuesday. The program will result in about $18 billion ($1.9 trillion yen) of extra money spent by domestic tourists, Baba estimated.

With or without Tokyo, the program was never going to deliver a major fillip to Japan‘s $5.1 trillion economy, but it may help a tourist industry that’s been slammed by the coronavirus. The Bank of Japans Tankan survey this month showed sentiment at hoteliers and restaurant operators plunging to a record low.

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Initially, the program was designed to cover the entire country, but Tokyo ended up getting excluded after public concern over rising infection numbers in the crowded capital. The city has been recording around 150-250 new cases every day recently. While those numbers are far lower than in some big cities in the U.S. and elsewhere, many Japanese worry about the spread.

Until the pandemic, spending by millions of tourists from overseas had been a meaningful contributor to Japan‘s growth. That’s gone for now, and it remains to be seen whether the “Go To Travel” incentives will succeed in encouraging domestic travelers to start moving around again. Baba estimates that Japanese normally spend more than 80% of their tourism money at home.