Japan’s recovery from COVID-19 and what lies beyond

JLL Japan Research has released the monthly Recovery Index – a comprehensive indicator to visualise how the socio-economic situation, which has deteriorated due to the COVID-19 pandemic, is recovering.

April 12, 2021

In January 2021, the Nikkei-225 Stock Average reached a peak not seen in 30 years, despite the third wave of COVID-19 cases. However, the real economy remains sluggish. As such, JLL Japan Research released the monthly Recovery Index – a comprehensive indicator to visualise how the socio-economic situation, which was hit hard during the pandemic, is recovering. The index shows that the momentum of the recovery are largely depending upon government measures.

With the first wave of COVID-19, followed by a nationwide “State of Emergency” in April 2020, socio-economic activities temporarily came to a halt. Figure 1 shows the six sub-indices of the JLL Recovery Index and their monthly changes since the beginning of 2020. The Mobility Index, which had already deteriorated due to the strengthening of border enforcement measures, bottomed out in April. In May; Employment, Production and Demand Indices fell to their worst levels, and the Total Index recorded its lowest level.

As the “State of Emergency” was lifted in late May, green shoots emerged in socio-economic activities. Even during the summer, socio-economic activities were not severely restricted despite the second wave of COVID-19. In October, the government's tourism support measure, the "Go To Travel" campaign, significantly improved the Mobility Index. The Total Index exceeded March’s level when the impact of COVID-19 had only begun to show. However, in late December, as COVID cases and deaths increased sharply with its third wave, the government suspended the "Go To Travel" campaign. It declared a "State of Emergency" in January 2021, mainly targeting the food and beverage industries in 11 prefectures, including Tokyo and Osaka. As a result, the Mobility and Demand Indices deteriorated again, and the Total Index also declined.

Figure 1: JLL Recovery Index (excl. Real Estate Index)

Source: JLL, March 2021

In addition to the “State of Emergency” and the “Go To Travel” campaign, the government's COVID-related measures temporarily changed the way we live and work, consequently affecting the real estate market. Hotels and retail sectors, which were affected by sluggish sales due to travel restraints, stay-at-home requests and shortened business hours, became stagnant. On the other hand, stay-at-home policy resulted in further expansion of e-commerce, boosting the logistics sector. The importance of residential sector is being re-evaluated due to work-from-home practices, drawing investor interest.

The office sector is at a turning point since corporates are considering new office allocation strategies propelling remote working and the implementation of social distancing in office spaces. COVID-19 has acted as a catalyst for the office sector, accelerating the creation of a hybrid-working style, combining a main office with work-from-home, satellite offices, and co-working spaces. The new office is witnessing an increased use of technologies to enable web conferencing, monitoring, performance optimisation and contactless services. The focus is on improving sustainability through the pursuit of worker wellbeing and achieving net-zero carbon for workplaces.