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The economic effects of “local production for local consumption” vs Go To Travel campaign

The Go To Travel campaign appears to have been temporarily suspended.

The government has been insisting that the economy must be turned around despite the COVID-19 situation, and it has appealed to the public to support domestic travel as a means of supporting the economy. But is this really the case?

Let’s try thinking about the economic effects in this case.

If we compare the scenario where the Go To Travel campaign has been rolled out as planned and the scenario where it has been temporarily suspended, we will find that the average consumption in the latter case will be lower by 180.9 billion yen per month, or 2,170.8 billion yen per annum. This is equivalent to 0.39% of our GDP.

To get a better idea of the magnitude of this figure, it has been estimated that the total economic losses caused by COVID-19 will be around 6.1% of our GDP (or 30 trillion yen), according to a METI report.

If we also account for the 1.4% GDP increase that the government had projected at the start of the year, this means that we would have lost 7.5% of our GDP. In comparison, the losses of 0.39% from the Go To Travel campaign make up only 5.2% of this figure.

In other words, our national power had been declining and the amount of outstanding government bonds (national debt) had been rising even before the economic losses caused by COVID-19. Corporate Japan will eventually collapse if it fails to address the more deep-rooted problems.

So, what should we do?

In the short term, individual consumption (of which the Go To Travel campaign is a part) remains important, considering the components of Japan’s GDP and the fact that we have no natural resources. Dining out is still hardly a trend in Japan as compared to Europe and the United States, and there is more room for growth in the F&B industry than the tourism industry. This is something we need to support even if it means a higher national debt. We should encourage capital investment in restaurants to allow them to adopt precautions against the “three C’s” and provide generous operational subsidies.

Dining at restaurants in one’s vicinity can contribute to the economy while limiting the transmission of COVID-19 as compared to traveling to distant locations. For example, it would be great if we can create the safest place in the world by setting up PCR test kits at the entrances of restaurant chains and allowing guests who test negative to enjoy their meal without having to wear a mask. If we are able to offer services where guests can be vaccinated after their meal, it would be even better!

Of course, once herd immunity has been achieved, we can encourage more traveling! The digital transformation of our country should be a priority in the medium term. We need to learn from countries like Estonia and Sweden and enhance our administrative efficiency.

Once we have made progress in the digital transformation of private companies in Japan, we can then decentralize offices that are clustered in urban areas to rural areas, which will be accompanied by the decentralization of the population and the revitalization of rural areas. Although Japan has a small land area, we have a rich natural heritage. There are mountains, rivers, and seas all across the country. Even though we lack natural resources such as oil for our industries, we can leverage our rich natural heritage to boost domestic demand further.

No matter where we live in Japan, we can go online and buy crabs that have just been landed in Hokkaido without traveling and have them delivered to us by Super Logistics in a few hours. If the short-term F&B policies and the medium-term digital transformation goals mentioned above are successful, a new “local production for local consumption” market will emerge.

“Local production for local consumption” refers to the idea of using products that have been produced locally to fulfill local consumption demands. This allows consumers to get their hands on fresher and cheaper agricultural products at locations close to where they live.

Walmart is doing better than Amazon because it understands this concept.

In the long term, even more policies would need to be introduced to address the “declining birthrate” part of Japan’s “declining birthrate and aging population” problem. Any country whose number of young people is not growing has no future. Although it is good that the government is encouraging the development of AI matching, it must also take decisive action by drawing on the latest science, including the introduction of policies to ramp up support for AI-based in vitro fertilization and reduce the cost of freezing eggs.


So, if we actually think about this rationally, it becomes clear that there are still many means by which our human civilization can make progress.


◆References: “Japanese people do not truly understand the reality behind their country’s achievements: The massive GDP of Japan that is unbalanced on a per-capita basis” (Domestic Economy – Toyo Keizai Online)