Recovery on the horizon

How the coronavirus has affected European businesses in Japan

May/June 2020 Feature / Text by Dan Sloan

The Tokyo 2020 Olympics and Paralympic Games raised expectations for domestic and international businesses in Japan, which envisioned an unprecedented year for the economy. Unfortunately, Covid-19 and its tragic aftermath have brought a 2020 that no one could have imagined.

The pandemic’s death toll has exceeded 900 in Japan with over 17,000 infected; its economic impact has pushed the nation into recession. Nonetheless, Japan has so far weathered the crisis with fewer casualties and a less severe business slowdown than many countries, although the duration and ultimate consequences of the pandemic remain unknown. Many businesses were expanding ahead of the Games, including those in Japan’s travel and hospitality industries. However, the coronavirus has hit firms in these sectors particularly hard, going from fully booked to minimal operations. The nation had hoped for a record 40 million visitors in 2020, but international travel had dropped by 99% and hotel occupancy fell to less than 30% by spring. The number of foreign visitors in April was the lowest since 1964, when these government statistics began.

The International Air Transport Association said in April that Japan traffic had already contracted this year by about 94 million passengers. The German airline Lufthansa had expected its 45 weekly flights to Japan to be at full capacity this summer, but the pandemic left the carrier as the only European airline serving Haneda Airport, with just three weekly flights to Frankfurt.

“We are currently adapting our summer schedule from mid-June,” says Donald Bunkenburg, senior director for Japan and Korea at Lufthansa Group. “Our planned schedule will depend on the loosening of entry restrictions both in Japan and Europe. Current staffing remains unchanged, and we are trying to preserve jobs.”

To entice foreign visitors to Japan over the next year, the country is planning a ¥1.35 trillion subsidy programme, which will underwrite part of domestic travel costs. But the industry still faces many uncertainties.

“How will demand for travel develop? Will corporate business return? Will the tourist market segment return? Which destinations will be prioritised or even be open for travellers?,” asks Bunkenburg. “We are currently developing our vision of future customer expectations and prerequisites for safe travel, such as the wearing of masks onboard our flights.”

Also within the hospitality industry, the food and drink category has been severely affected by the state of emergency. Restaurants and bars across the country have had to close or reduce their hours of operation. After booming sales during the Rugby World Cup (RWC) last year, Heineken Kirin Japan says the firm was in better shape this year to endure the stay-at-home orders.

“Coming off sponsorship of the RWC 2019, Heineken Kirin Japan established strong brand awareness, which put us in a better position to weather the business impact with the recent decrease in beer consumption,” says Tony Wheeler, the firm’s general manager. “The hospitality industry has taken the largest hit, and we are working with our customers to explore activations adjusted to this renewed reality.”

The Olympics was touted as a catalyst for Japanese government policy initiatives, but some, such as greater adoption of telework, failed to gain traction before the pandemic. As of April, 60% of Japanese workers were still commuting to offices, according to the Mainichi Shimbun, while firms with work-from-home options were in a stronger position after Japan’s state of emergency declaration.

Swiss financial giant UBS, with 700 staff in Japan, already offered alternative work arrangements going into the Covid-19 crisis as financial markets remained open.

“Even before the pandemic, we were trying to promote remote-work as part of Japan’s hataraki-kata kaikaku [work-style reform] efforts. Our staff were already relatively open,” says Jason Kendy, UBS’s head of corporate communications for Japan and Korea. “We kept increasing home-based work and eventually moved everyone home except for people required in our offices.”

As Japan slowly begins to reopen, new workstyles are taking root and safety precautions are being introduced at some European firms, including those in the aerospace sector.

“The aerospace world has been highly impacted by the pandemic. In Japan we have activated a business continuity plan to protect our employees and our operations,” says Helene Burger, head of HR for North Asia at Airbus Japan. “Now that the state of emergency has been lifted, we are back to normal working hours. However, telework is still highly encouraged, and all social distancing and infection prevention measures in the office are being maintained.” Heineken’s Wheeler said telework will be the new normal at his firm.

“We commenced teleworking and staggered hours in late February, which provided us with an opportunity to test the processes and technology in advance,” he says. “By no means has it been perfect, but it has created a strong framework for teleworking in the future.”

Shoji Toyofuku, a member of the EBC Medical Equipment Committee, said the group compiled a survey on corporate steps taken after the state of emergency with regard to business trips, visitor restrictions, and telework at member firms.

“Our customers are medical organisations such as hospitals and medical laboratory institutes,” says Toyofuku.

“We found new ways to communicate with them. We held ‘net’ meetings, and product specialists could attend many meetings without travelling all over Japan.” Other government measures, such as introducing online health consultation services, have been implemented during the pandemic. Yumiko Murakami, head of the OECD Tokyo Centre, says more changes will come.

“Japan was behind — especially in labour policy, remote work, and digital medical service,” she says. “Some changes can be accelerated. The government deregulated the digital medical services sector over the course of four weeks.”

Global health conditions will likely dictate whether Tokyo 2021 is an asterisk in the history books or is given the all-clear. Prime Minister Shinzo Abe insists the Games must have spectators to truly underscore the comeback of the global community from the pandemic.

Members of the European business community in Japan see recovery on the horizon but believe it will be gradual.

“It’s not about having a clear timeline, but about establishing new operations by this fall and winter,” says the EBC’s Toyofuku. “Development of vaccines and enhancement of tests are also key.”

Heineken Kirin’s Wheeler notes that as more restaurants and bars reopen, consumption trends may also change, so flexibility is key.

“Our ability to recover will also be determined by our ability to adapt continuously to these changing circumstances,” he says. “We will need to be a more agile and connected business.” •