kansai and the asia pacific economic outlook: 2019 …...• risk management and inbound tourism...

Kansai and the Asia Pacific

Economic Outlook: 2019-20

Official Release

10th June 2020

2 ©2020 Asia Pacific Institute of Research. All Rights Reserved

Contents of Part ⅡChapter 2 The Economies of Japan and Kansai : A Retrospective and Outlook

Section 1. The Japanese Economy : Current State and Short-Term Forecasts

Section 2. Kansai’s Economy : Current State and Short-Term Forecasts

Section 3. The Economies of Kansai Prefectures in FY 2017 and FY 2018

Section 4. Analysis of Greater Kansai’s Economy Using an Inter-Regional Input- Output Table

Section 5. Review of the Kansai Economy in the 30 Years of the Heisei Era from the Perspective of Export

Structure

Chapter 3 Issues and Outlook for the Kansai Economy

Section 1. Overview and Issues of Infrastructure Development in Kansai

Section 2. Foreign Workers in Kansai: History and Legal Status

Section 3. Promoting Active Labor Participation by Women

Section 4. Attracting Foreign Workers and Fostering Entrepreneurship in Japan and in Kansai

Chapter 4 Inbound Tourism and Kansai’s Economy

Section 1. The Determinants of Inbound Tourism Demand : A Microdata Analysis

Section 2. Toward a Risk-Aware Strategy for Inbound Tourism

Section 3. Deciphering Overtourism Perceptions in Kansai : A Comparison with Europe

Section 4. Developing a Timely Indicator for Inbound Tourism

Section 5. Prospects for the Expo 2025 Osaka, Kansai and MICE/IR Using an Inter-Regional Input-Output Table


成果報告2016 ―転換期、新たな道筋を示すPartⅡ OutlineChapter 2 The Economies of Japan and Kansai:A Retrospective and Outlook

• Japanese and Kansai’s economies: current state and short termforecasts. Analysis by prefecture

• Review of the Kansai Economy in the 30 years-long Heisei Era from the Perspective of Export Structure

Chapter 3 Issues and Outlook for the Kansai Economy

• Women and foreign workers: a micro-economic perspective of long and mid-term issues

Chapter 4 Inbound Tourism and Kansai’s Economy

• The determinants of inbound tourism demand

• Risk management and inbound tourism strategies. The development of indicators for inbound tourism

• Prospects for the Expo 2025 Osaka, Kansai and MICE/IR using an inter-regional input-output table


1.4

0.2

▲ 0.5

▲ 4.3

2.0

0.1 0.20.6 0.4 0.50.5

▲ 0.1 ▲ 0.2

▲ 1.6

0.1

1.9

0.3 ▲ 0.1

▲ 5.6

2.5

-6.0

-4.0

-2.0

0.0

2.0

4.0

2017 2018 2019 2020 2021

(%)

(FY)

Private demand

Public demand

External demand

GDP growth rate

0.7 0.6

▲ 0.5

▲ 4.7

1.8

0.2 0.10.5 0.4 0.3

1.3

0.0

▲ 0.2▲ 0.7

0.5

2.2

0.7

▲ 0.2

▲ 5.1

2.6

-6.0

-4.0

-2.0

0.0

2.0

4.0

2017 2018 2019 2020 2021

(%)

(FY)

Private demand

Public demand

External demand

GRP growth rate

成果報告2016 ―転換期、新たな道筋を示す

Real GDP growth forecast for Kansai: -5.1％ in FY 2020, +2.6% in FY 2021.

Due to the slowdown of the domestic and global economy caused by the Covid-19 pandemic, as well as the urge to adopt a 'new lifestyle’ as a long-term fight against Covid-19, there is a new kind of pressure on economic activities.

The consumption tax hike and the Covid-19 pandemic dealt a double blow to Kansai’s and Japan’s economies. As a result, the regional and national economies are expected to follow similar growth paths, with similar contributions to growth by the main demand components.

Kansai Japan

Chapter2 Section1・2

The Economies of Japan and Kansai: A Retrospective and Outlook


成果報告2016 ―転換期、新たな道筋を示すSummary of the Latest Forecasts UPDATE

Summary of Forecast Results

FY 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021

Household final consumption expenditure (HFCE) 0.6 0.1 ▲ 0.6 ▲ 5.1 3.4 1.1 0.1 ▲ 0.6 ▲ 4.9 3.5

Private residential investment ▲ 4.8 0.9 ▲ 1.7 ▲ 9.5 3.7 ▲ 1.4 ▲ 4.9 0.3 ▲ 8.3 2.4

Private non-residential capital investment 4.8 1.3 0.1 ▲ 9.8 3.8 4.3 1.7 ▲ 0.9 ▲ 7.8 0.7

Government final consumption expenditure (GFCE) 0.8 0.7 1.8 1.5 1.0 0.3 0.9 2.4 1.3 0.9

Public fixed capital formation 0.4 0.1 3.7 2.7 3.0 0.5 0.6 3.3 2.3 4.8

Exports 7.3 ▲ 1.2 ▲ 2.4 ▲ 16.2 9.4 6.4 1.7 ▲ 2.7 ▲ 20.3 7.8

Imports 4.8 ▲ 1.2 ▲ 1.8 ▲ 15.4 7.8 3.9 2.5 ▲ 1.7 ▲ 10.3 6.4

Real GRP/GDP 2.2 0.7 ▲ 0.2 ▲ 5.1 2.6 1.9 0.3 ▲ 0.1 ▲ 5.6 2.5

Private demand (contribution) 0.7 0.6 ▲ 0.5 ▲ 4.7 1.8 1.4 0.2 ▲ 0.5 ▲ 4.3 2.0

Public demand (contribution) 0.2 0.1 0.5 0.4 0.3 0.1 0.2 0.6 0.4 0.5

Net exports (contribution) 1.3 ▲ 0.0 ▲ 0.2 ▲ 0.7 0.5 0.5 ▲ 0.1 ▲ 0.2 ▲ 1.6 0.1

Nominal GRP/GDP 2.4 0.4 0.6 ▲ 4.7 2.6 2.0 0.1 0.7 ▲ 5.1 2.4

GRP/GDP deflator 0.1 ▲ 0.2 0.7 0.4 ▲ 0.1 0.1 ▲ 0.2 0.8 0.4 ▲ 0.1

Consumer price index 0.5 0.5 0.7 ▲ 0.2 0.2 0.7 0.8 0.6 ▲ 0.4 0.4

Industrial Production Index 2.5 ▲ 0.1 ▲ 3.8 ▲ 8.6 4.9 2.9 0.3 ▲ 3.8 ▲ 9.0 5.7

Unemployment rate 2.9 2.8 2.6 4.2 4.1 2.7 2.4 2.4 3.6 3.5

Kansai Japan

Notes: Unit= %. Figures for all components except ‘Total unemployment rate’ are growth rates. 2017-8 figures are official, 2019-21 figures are APIR

forecasts. Forecasts for the Japanese economy are sourced from APIR’s Economic Forecast and Analysis No.128 .


成果報告2016 ―転換期、新たな道筋を示すChapter2 Section3 UPDATE


✓ In FY 2018, the positive growth in Osaka Prefecture was offset by negative

growth in other prefectures, resulting in a flat trend.

✓ In FY 2019, we estimate that growth was negative in all prefectures,

including Osaka.

2.2

0.0

-1.0

1.9

0.3

-0.1

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

FY 2017 (final figure) FY 2018 (estimate) FY 2019 (estimate)

(%)Osaka

Hyogo

Kyoto

Shiga

Nara

Wakayama

Kansai

Japan (calendar year)



2. Inter-regional trade structure from the viewpoint of balance of payments

✓Inter-regional balance of payments refers to the “regional economic structure of the international

balance of payments” obtained by deducting imports from exports.

✓Osaka Prefecture accounts for about 40％ of Kansai’s economy, and its trade balance with different

regions shows a JPY 3.9 trillion surplus. With respect to Greater Kansai as a whole, it had a JPY 843

billion surplus. Therein, it had a negative balance with Mie, Wakayama and Tokushima, but a positive

one with other prefectures.

Chapter2 Section4



2-1. Changes in importers

✓From 1989 until 2002, US was the most important destination market for

Kansai’s exports. However, since 2003 US was replaced by China, and the amount

of Kansai’s China-bound exports grows every year.

✓In 1989, textiles ranked first, and Kansai’s share of the nation’s textile exports

was 86％. Nonetheless, by 2018 semiconductors and other electronic parts had

taken the first place, reaching 45.7％ of the nation’s exports in this sector.

Chapter2 Section5

The Economies of Japan and Kansai : A Retrospective and Outlook



✓In the Chubu region, the US has consistently been largest importer for the past 30

years, followed by the ASEAN countries.

✓The largest exports in Chubu are automobiles, and the region’s share of the nation’s

exports has consistently been above 40％ for the past 30 years. Their major export

goods also include automobile parts and electrical measuring equipment, indicating

that the automotive industry has not changed much for the past 30 years.

Chapter2 Section5

The Economies of Japan and Kansai:A Retrospective and Outlook



✓The largest importer from the Kanto region has consistently been the US, just like the Chubu

region. On the other hand, exports to the ASEAN countries, Taiwan, and China have shown a steady

rise.

✓In 1989, automobiles ranked first among export goods from the Kanto region. By 2018, however,

semiconductor manufacturing equipment had replaced automobiles, and its share of the nation’s

exports (approx. 50％) in this sector is double relative to semiconductors and other electronic parts.

Chapter2 Section5

The Economies of Japan and Kansai:A Retrospective and Outlook


3-2. Trends in exports of intermediate goods

✓China's global supply chains continued to develop, and the domestic share of computer

and electronic equipment sales expanded. However, since 2018 the trade frictions with the

US have triggered the disruption of China’s global supply chain mechanism.

✓The reduction of China’s exports to the US has lead to a sudden decline in domestic

production of electrical and precision machinery. This caused concerns regarding a weak

demand for intermediate goods (semiconductors), which are production components.

Chapter2 Section5



3-2. Trends in exports of intermediate goods

✓ Semiconductors and other electronic parts account for approximately

50％ of Kansai’s China-bound exports. Therefore, Kansai is the most

sensitive region to the production state of electrical and precision

machinery in China.

Chapter2 Section5




1. Japan is lagging behind in active participation by women

①”Gender equality” is one of the SDGs (Sustainable Development Goals) where Japan doesn't fare well. ② Although Kansai has a low ratio of women engaged in work, when it comes to the ratio of women in administrative and managerial positions, Kansai’s number is relatively higher than the rest of Japan.

Chapter3 Section3

Issues and Outlook for the Kansai Economy


1. Foreign migrant workers in Japan and Kansai: trends and characteristics

✓ In recent years, full-time migrant workers account for 20% of the total number of foreigners in Japan.

✓ The growth rate of the number of foreign workers in Kansai was higher than in the rest of the country.

移住労働者の定義と特徴Chapter3 Section4



4. Toward fostering entrepreneurship and attracting highly skilled workers

✓ Attract international university students → provide information (tuition fees, university rankings)

✓ Provide information regarding the majors that are in demand by businesses → Universities + Companies

✓ Increase the flexibility of the recruitment process → Career path by company + Career path by occupation

✓ Improve the image of Japanese companies → craft an image of diversity

✓ Provide a long term vision to migrants → Immigration policies

高度人材と起業家の誘致に向けてChapter3 Section4




2. The determinants of inbound tourism

✓ When analyzing inbound tourism demand, two perspectives are important: 1) that of the

demand-supply side, and 2) that of the time horizon (for how long lasts the impact).

Chapter4 Section1

Inbound Tourism and Kansai’s Economy



4. Analysis results and implications

✓Currency exchange rate has a major impact on inbound tourism demand (foreign visitors’

consumption). Annual income also plays a significant role, however, it is not as important as

the exchange rate.

✓Visa relaxation policies also have a positive impact on inbound tourism demand. However,

the positive effects start losing steam after a certain period.

✓From a long-term perspective, the most important factor for inbound tourism demand is no

other than the brand strength of goods and services offered to foreign visitors.

Chapter4 Section1




1. Introduction — Risks to inbound tourism demand

✓ Without adequate measures, the aforementioned determinants can transform into risk factors.

✓ Examples of very short term risk factors include natural disasters and pandemics.

Chapter4 Section2




3. Very short-term risks: the impact of natural disasters

✓ The timeline of the 2018 KIX closure: KIX was unable to receive any foreign visitors for about a week

after September 4, 2018, when Typhoon Jebi hit. Despite the fact that it eventually reopened on September

21, on September 30 KIX had to be closed yet again, this time due to Typhoon Trami.

✓ Economic losses caused by the KIX closure: the inbound tourism-related losses were JPY 31.7 billion, while

the losses caused by the reduction of KIX functions were JPY 28.1 billion. Thus, the combined economic loss is

estimated at JPY 59.8 billion.

Chapter4 Section2




8. Conclusions

✓ The figure below illustrates the phenomenon of overtourism in Kyoto.

✓ Group tourism, the characteristics and spatial distribution ofaccommodation facilities, and public transportation infrastructure areimportant factors when considering the issue of overtourism in Kyoto.

Chapter4 Section3




✓ By focusing on two types of open data (visit ratio・number of foreign visitors) we

created a monthly visit ratio index.

✓ Using the monthly visit ratio, we formulated a time-series model and then conducted an

advanced estimation. This means that the timely use of the two types of open data is

possible.

✓ Therefore, we could estimate the number of foreign visitors by prefecture in almost real

time.

✓ Thus, this index can be used by DMOs and local governments in their strategy development.

2. Conceptual framework of the new indicator

Basic formula：

the number of foreign visitors by prefecture =the visit ratio by prefecture × total number of foreign visitors to Japan

Chapter4 Section4




3-2. Visit ratio by prefecture

✓ In 2015-16, the visit ratios of Osaka and Kyoto prefectures were on an uptrend. However, they

stagnated in 2017-18.

✓ By contrast, the visit ratio of Nara prefecture grew remarkably. In the second quarter of 2016,

Nara surpassed Hyogo. Is this the birth of a new business model?

Chapter4 Section4




4. Converting quarterly data into monthly data : a time-series estimation

✓ The advance estimation results for the visit ratios and the number of foreign

visitors in October 2019: the Monthly Inbound Report published on APIR’s

homepage.

Chapter4 Section4


Note: the results are as of October 2019. For the latest data, visit APIR’s homepage.



3. Economic ripple effect of Expo 2025 in Osaka

✓ We estimate the final demand generated by the Osaka Expo 2025 at JPY 1.3243 trillion (JPY

189.7 billion for venue construction costs, JPY 229 billion for operating costs, JPY 73 billion for

related operating costs, JPY 832.6 billion for visitor consumption spending). While most of the

final demand is generated in Osaka Prefecture (JPY 1.2166 trillion), some of it is generated in

Kyoto (JPY 36.5 billion) and Hyogo (JPY 29.7 billion).

✓ While the nationwide induced production effect is JPY 2.6 trillion, the effect in Osaka Prefecture is

JPY 1.9 trillion and JPY 740.2 billion is outside Osaka Prefecture.

Chapter4 Section5




3-3. The Case of an upward swing in foreign visitor numbers to Japan

✓ In the case of an upward swing in overseas visitors to 5.3 million from the baseline

scenario (3.5 million visitors), the induced production value would be JPY 2.7619

trillion (the induced gross added value, JPY 1.4906 trillion). In terms of percentage,

the increase would be around 5.5 to 6.0％ from the baseline scenario.

Chapter4 Section5




✓ The most important factors to keep in mind in case of inboundtourism are safety, security and relief. In addition, brand power,innovation, and wider area integration are also paramount.




✓ As of April 2020, the number of foreign visitors arriving at KIX has evaporated (-99.9% YoY).

✓ By comparison with the recovery patterns following the aftermaths of the Lehman shock or the

Great East Japan Earthquake, this time the decline caused by COVID-19 will continue to be as

significant as in April, unless an effective vaccine will be developed soon.


310.2

0.4 0

100

200

300

400

500

600

700

800

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(Thousands)

Foreign visitor arrivals

-4.0

20.5

-57.6

8.7

-66.0

-95.1

-99.9 -100.0

-80.0

-60.0

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

(%)

Lehman Brothers shockGreat East Japan Earthquake

Coronavirus outbreak

Number of months before and after

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