Japan to Suspend Travel Incentives Nationwide as Virus Spreads

(Bloomberg) -- Japanese Prime Minister Yoshihide Suga suspended his signature domestic travel incentive system nationwide for two weeks over the New Year holidays amid record coronavirus infections and a slide in support for his cabinet.

The government will halt all use of “Go To” travel incentives from Dec. 28 to Jan. 11, Suga said Monday. The unexpectedly broad suspension will cover what is usually one of the busiest travel periods of the year, when people head to family gatherings across the country. Tokyo Governor Yuriko Koike in a separate briefing requested restaurants and bars to continue with shortened hours also until Jan. 11.

Suga has defended the domestic tourism subsidies as the best way of propping up regional economies and protecting the millions of jobs in the travel industry. But his campaign cost him political capital, with concerns over the outbreak helping push support for his cabinet down to 40% in a survey carried out by the Mainichi newspaper Dec. 12, from 57% a month earlier.

Japan on Saturday topped 3,000 new confirmed daily infections for the first time and critics contend the movement of people likely contributed to the country’s most serious wave of infections so far. Meanwhile, just 14% of respondents said they approved of the government’s handling of the virus, a drop of 20 percentage points, the survey showed.

“In order to prevent any further spread of the infection over the New Year, and to reduce the burden on medical facilities, we decided to put together the strongest possible measures,” Suga said. He added that policy on the travel program after Jan. 11 would depend on the infection situation.

The nationwide halt poses risks for an economy trying to recover from its worst contraction on record in the second quarter of this year. The move could eliminate 89.3 billion yen ($861 million) in consumer spending, Nomura Research Institute economist Takahide Kiuchi said in a research note.

Masaki Kuwahara, an economist at Nomura Securities, 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 added.

Sagging support could also limit Suga’s options for calling the next election, with the Oct. 21 end of the lower house term looming.

Suga, who took office in September, has vowed twin efforts to control the virus and revive the economy. The travel incentive program, however, had seemed increasingly out of touch with a public largely focused on health risks.

Ahead of the announcement, government sources told local media that a more modest plan was on tap where the government would halt “Go To” subsidies for trips to Tokyo and Nagoya. It would ask travelers to voluntarily refrain from using the program for journeys starting in the two cities where infections are surging.

The broader and unexpected halt may indicate Suga is prepared to be more responsive to public opinion than his predecessor, Shinzo Abe, who was known for pushing through measures unpopular with the public.

But while more than half of respondents to the Mainichi survey said a state of emergency should be declared -- a measure that hasn’t been used for more than six months -- Suga on Monday told reporters he wasn’t considering such a move.

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