Go To Travel suspension will weigh on consumption

PM Suga’s decision on Tuesday to halt the Go To Travel campaign for two weeks from 28th December may put the recovery in services spending into temporary reverse. It comes after authorities in Tokyo, Osaka, and Nagoya this week extended requests for bars and restaurants selling alcohol to close early and for residents to avoid non-urgent, non-essential outings. Daily coronavirus cases continue to rise sharply, and both deaths and the number of patients with severe symptoms hit a fresh high this week. The light-touch measures announced so far haven’t translated into fewer people leaving their homes. We therefore suspect that local restrictions will have to be tightened further, including via some targeted business closure requests. Off the back of a strong October, we expect consumer spending to rise a further 1.2% q/q this quarter after Q3’s 5.1% q/q rebound. But we think private consumption will flatline in Q1 2021.