Triple bottom line analysis of the decline in foreign tourist demand in Japan due to the COVID-19 pandemic: Counterfactual structural decomposition approach

Abstract

This study developed a consumption-endogenous input–output analysis framework and a novel counterfactual structural decomposition analysis (SDA) framework to assess the economic, social, and environmental effects of the 2020 decline in foreign tourists due to the COVID-19 pandemic. The results show a pandemic-induced loss of 33 million tourists, resulting in 3.44 trillion JPY in value-added losses, employment declines for 868,976 people, and environmental benefits of an 11.6 Mt-CO₂ emissions reduction. Sectors hit the hardest include hotels, eating and drinking services, and wholesale and retail trade. The deterioration revealed a 100% reduction in value added from foreign visitors, whereas shifts in production contributed to a 3.6% increase in CO₂ emissions. This study recommends government intervention, focusing on stipends for sectors with the highest value-added losses and employment declines, as well as support funds for sectors that reduce environmental impact.