The Bank of Korea Says "COVID-19 Inevitably Hits Japan's Service Industry"

Long-term Potential for Growth in Contactless Services, Robotics, and AI Industries

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] It is forecasted that the novel coronavirus infection (COVID-19) will significantly shrink Japan's service industry in the short term. The service industry accounts for more than 70% of Japan's total industrial production and employment.

On the 26th, the Bank of Korea stated in its 'Overseas Economic Focus' report, "As Japan's service industry is greatly contracting due to COVID-19, and with the Tokyo Olympics postponed by one year, the downturn in the service industry is expected to deepen for the time being," adding, "It has been found that Japan's economy deteriorated in the first quarter in sectors such as large department stores, accommodation, and travel due to the decline in foreign tourists."

Japan's three major large department stores showed consecutive sharp drops in sales in February and March this year. Daimaru Matsuzakaya's sales plunged by 21.8% and 43.0% year-on-year in February and March, respectively. Mitsukoshi Isetan's sales fell by 15.3% and 39.8%, and Takashimaya's sales decreased by 11.7% and 36.2%.

Economic losses due to the postponement of the Olympics are also a concern. According to the Dai-ichi Life Research Institute, the postponement of the Tokyo Olympics is estimated to cause economic losses of approximately 1.7 trillion to 3.2 trillion yen, mainly in the service industry.

Although the service sectors such as travel, tourism, and leisure will be hit by COVID-19, medical and nursing services are expected to see a significant increase in demand. The Bank of Korea stated, "The COVID-19 situation is expected to serve as an opportunity for the growth of the non-face-to-face medical service market, such as telemedicine, in Japan," and forecasted, "After the situation stabilizes, the non-face-to-face medical service industry, including telemedicine useful for quarantine, will grow along with related investments."

Furthermore, it added, "In the long term, the experience of COVID-19 spread is expected to positively influence the spread and establishment of labor-saving technologies across the entire service industry." Already, in countries like China and Singapore, disinfection and goods transportation using robots and unmanned convenience stores have been introduced and are operating, and in Japan's service industry, demand related to non-face-to-face services is also expected to increase significantly. The Japan Center for Economic Research also predicted, "The spread of COVID-19 will serve as a catalyst for the transition to remote supply systems utilizing robots and ICT technology."

The Bank of Korea emphasized the need to closely observe these changes in Japan's trends. Although there will be short-term damage to the service industry, "in the long term, it is expected to serve as an opportunity to further promote the growth of non-face-to-face service industries such as telemedicine and the demand for labor-saving technologies using robots and AI. Additionally," it stressed, "since South Korea shows similar patterns to Japan in terms of demographic changes, it is necessary to refer to Japan's case to seek favorable directions and policy efforts for the future development of South Korea's service industry."

This content was produced with the assistance of AI translation services.