Identifying critical supply chain paths affected by the decline in foreign tourist demand in Japan due to the COVID-19 pandemic: counterfactual structural path decomposition

This study investigates the economic, social, and environmental impacts of the decline in inbound tourism to Japan caused by the COVID-19 pandemic. Using a consumption-endogenized input-output model, we construct counterfactual scenarios and apply Structural Path Decomposition (SPD) to quantify the direct and indirect effects by visitor nationality (21 countries) and by ten contributing factors. The SPD results reveal that 81% of value-added losses, 86% of employment losses, and 75% of CO₂ emission reductions are explained within the estimated scope. In economic terms, the most substantial supply chain impact stemmed from Chinese visitor demand decline, particularly the “Hotels → Waste Management Services” path. Socially, the largest employment loss occurred through the “Hotels → Retail Trade” path, while environmentally, the “Hotels → Electricity” path showed the highest CO₂ reduction. The analysis demonstrates that final demand reductions were the dominant drivers across all impact aspects. Additionally, the study emphasizes the vulnerability of Japan’s tourism sector to exogenous shocks and proposes policy directions for disaster-resilient and sustainable inbound tourism development based on the SPD findings.