This is what a nation cut off from the rest of the world looks like
Head of Macroeconomic Research
Summary: Earlier this morning, there has been a couple of Japanese data releases. Japanese consumer price inflation was unexciting with a rate at 0% YoY. While we see some relative price changes in many countries, the basic story for the moment is that inflation will remain low in most countries. In addition, Japan National Tourism Organization has published its latest data regarding the flow of foreign visitors in July. Basically, it shows what a nation cut off from the rest of the world looks like.
The flow of foreign visitors in Japan published by Japan National Tourism Organization is out this morning. The country was supposed to welcome an unprecedented number of Olympic fans from all around the world just about now, but the pandemic has turned everything upside down. Arrivals of foreign visitors plunge 99% YoY in July, at 3,800 individuals (slightly up compared to the previous month, when it stood at 2,600 individuals). For the sake of comparison, at the beginning of the year, the country recorded more than 2.6 million foreign visitors in a month’s time. Whilst the country expected to draw around 40 million visitors this year, the final number for 2020 might fall to 7-8 million at best, which would represent a drop of 80% compared to the target. Over the past years, the contribution of travel and tourism to GDP has significantly increased, to reach 7% in 2019, on the back of government’s incentives to promote foreign tourism via marketing push overseas and eased visa requirements. The COVID-19 constitutes a serious setback for the government’s hopes for tourism and it is unlikely that the recent campaign to spur domestic tourism launched on July 22 will offset losses generated by the drop in the flow of foreign visitors. Considering the number of new COVID-19 cases has sharply increased since mid-July and that many countries at global level are facing the acute risk of second wave, the country is not expected to reopen to foreigners anytime soon and will probably postpone initial plans to let foreign students and businessmen return. Like Japan, many other countries has decided to close borders to fight against the spread of the virus, thus hitting hard the tourism sector. At the start of the pandemic, many economists underestimated the negative ripple effect on tourism. Now, there is a broad consensus that global tourism will not get back to normal before at least 2022-23, if it ever gets back to normal.
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.