Passenger services

In air travel, the recovery in demand appears to have been dampened by the summer travel season coinciding with an increase in Covid cases. The propensity to travel is expected to increase hereafter due to the year-end/new year and government measures to support travel. We are likely to be able to tell if senior citizens and travelers from regional areas, for which the recovery thus far has been weak, were simply hesitating to go out.

Although barriers to Japanese people leaving the country came down as some border restrictions were eased from 7 September, the number of Japanese traveling abroad did not increase. The level in both August and September was 18% of the 2019 level. Caution is likely needed, as a recovery in traveling overseas may be delayed by the weak yen and inflation overseas. For inbound demand, Narita International Airport has reported that the number of foreign visitors to Japan has recovered to around 30% of the 2019 level since border restrictions were eased significantly on 11 October, and that the number has risen around 10ppts from before restrictions were eased.

For railways, nationwide travel support measures have started steadily since 11 October, but the contribution still does not appear to be large. It is likely to be November or thereafter before we can confirm the impact from measures to promote tourism demand. Furthermore, heading into winter, there is risk of a renewed increase in Covid cases from the travel season and it is also possible that companies are expecting current working arrangements to continue.

Freight operations

The door-to-door delivery market slowed down somewhat alongside increased opportunities for people to go out. In particular, since we forecast that the number of people going out will increase at the year-end, there is strong uncertainty about the extent to which the company can make up for weak progress toward its plan in the busy season. ÌýAir cargo exports increased from the previous month, but the recovery following lockdowns in China has been weak and auto related cargo movement also appears to be soft. We think supply and demand is unlikely to deteriorate significantly since the increase in supply volume from restoring passenger flights has been limited, but the downtrend for freight rates is likely to continue hereafter due to decreasing demand. For container vessels, the pace of decline in spot freight rates on routes from Asia to the US west coast, which led in being adjusted, has eased in October. If major shipping companies do not engage in price competition, they seem likely to stop falling soon.