In an effort to support the aviation industry, Japan plans to temporarily cut its aviation fuel tax by 80%. 

On December 1, 2020, Reuters reported that Japan was considering lowering the tax from 18,000 yen ($172.58) per kiloliter to 4,000 yen ($38.21) during fiscal year 2021. 

The report said that the Japan government and the ruling coalition would carefully discuss the level of tax cut as the nation needs to secure funds for managing airports.

Travel demand has decreased significantly in Japan, since lockdowns and stay-at-home requests were issued at the start of the coronavirus pandemic. Japan’s air transport sector experienced a net loss of 349.7 billion yen ($3.3 billion) in the six-month period between April and September 2020. 

As Japan’s borders remain mainly shut, the country has witnessed a drop in foreign visitors. In October 2020, the number of visitors dropped by 99% compared to the previous year. The country started a Go To Travel campaign with an aim to restart the economy and promote traveling inside the country. However, due to the fear of traveling during the pandemic, the campaign was not very successful. 

Airlines have been hard-hit by a collapse in air travel. Earlier in October 2020, Japan’s government announced it would continue supporting the country's airlines. 

“The government is aware that the airlines are facing a severe business environment,” said the government's spokesperson. “The government will continue to talk with them and act properly.”

Japan’s biggest operator, ANA Holdings (ALNPY), is forecasting a record net loss of $4.8 billion for the fiscal year through March 2021.

AirAsia Japan (AAJ), owned by AirAsia group, due to the “challenging condition” ceased operations in Japan from October 5, 2020.