Economic Impact Analysis of COVID-19 in Japan Using a Regional Input-Output Table

Author Name TOKUI Joji (Faculty Fellow, RIETI) / OCHIAI Katsuaki (Japan Center for Economic Research) / KAWASAKI Kazuyasu (Chuo University) / MIYAGAWA Tsutomu (Faculty Fellow, RIETI)
Creation Date/NO. March 2021 21-J-010
Research Project Refinement and Analysis of the Regional-Level Japan Industrial Productivity Database: Analysis of Regional Industrial Linkages and Productivity
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In the spring of 2020 various activities were restricted under Covid-19 and consumers were forced to change their behavior. Although no region was free of infection, the spread in infection differed among regions, which meant different degrees of behavioral restrictions. At the same time, world trade shrunk sharply. The purpose of this paper is to analyze the economic impact of these events using an inter-regional input-output table. To this end, we convert data from various sources, such as the Family Income and Expenditure Survey, trade statistics, and tourism statistics based on industry classification and analyzed the effects by prefecture and industry using the 2005 Inter-Prefectural Input-Output Table. We find that almost half of the cause of the largest economic shrinkage in 2020, which occurred in May, can be attributed to the decline in exports in that month. Exports gradually began to recover in later months, but the slump in domestic consumption and inbound tourism still lingers. The reduction in consumption under Covid-19 mainly occurred in service sectors, where input-output is mostly met within the region of each prefecture and only a minor fraction of it spreads to neighboring prefectures. This implies that regional-level decision-making in selecting measures for preventing the spread of infections is appropriate, while taking their economic impact into account, since economic impacts rarely penetrate beyond prefectural borders. The only exception to this is tourism, for which the movement of customers from one place to another is inherent in the activity. If the "extinction" of inbound tourism lasts one full year it amounts to a 0.2 percentage point decline in GDP.