Skift Take

Japan's economy still has a long way to go to fully recover from the pandemic. But there is a light at the end of the tunnel for businesses heavily reliant on tourism — especially with the country poised to see the large-scale return of Chinese tourists.

Japan’s service-sector sentiment rebounded in February for the first time in four months, a government survey showed on Wednesday, a sign that the removal of COVID-19 curbs is giving a much-needed boost to the country’s sluggish consumption.

The outcome offers some relief for policymakers fretting that rising living costs could discourage households from shopping and traveling, thereby derailing Japan’s delayed recovery from the scars of the pandemic.

The survey of workers such as taxi drivers, hotel workers and restaurant staff, called “economy watchers” for their proximity to consumer and retail trends, showed their confidence about current economic conditions stood at 52.0 in February, up 3.5 points from the previous month.

“With more events and concerts being held, passenger numbers for international and domestic flights are starting to return to pre-pandemic levels,” a taxi driver was quoted as saying in the survey.

There is also hope the government’s decision to ease COVID restrictions on travelers from China will give a boost to retailers and other industries reliant on inbound tourism.

“We’re seeing clear signs of recovery in travel demand, which has been lackluster so far,” a travel agency was quoted as saying in the survey.

Shares of Japanese retailers rallied on Wednesday on optimism for a return of mainland Chinese tourists, helping lift the Nikkei stock average to a 3-1/2 month high.

But the survey also quoted a convenience store operator as saying that companies and households were seeing budgets squeezed by rising utility bills, suggesting the outlook for consumption remained murky.

Japan’s economy averted recession in the fourth quarter but rebounded much less than expected due to soft capital expenditures, highlighting the fragile state of the country’s recovery.

While policymakers hope households will boost spending with savings accumulated during COVID curbs, soaring fuel and raw material costs have eroded purchasing power.

Real wages fell by the most in nearly nine years in January as inflation hit a four-decade high, data showed on Tuesday, boding ill for the outlook for consumption.

(Reporting by Leika Kihara; Editing by Kim Coghill)

This article was written by Leika Kihara from Reuters and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].

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Tags: china outbound, Chinese tourists, japan, reopening, reopening travel, travel recovery

Photo credit: A large group of travelers at Asakusa in Tokyo. The large-scale return of tourists to Japan has given the Japanese economy a significant boost. chensiyuan / Wikimedia Commons

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