Business News

Overseas tourists offer fresh boost to Japan’s economy

Jonathan Soble
Pedestrians and tourists walk along a street in Kyoto, Japan.
Tomohiro Ohsumi| Bloomberg | Getty Images

The last time foreign tourists spent more money in Japan than their Japanese equivalents spent overseas, the Apollo moon landing was still fresh in the memory, Osaka was hosting Asia's first World's Fair and a dollar bought three-and-a-half-times more yen than it does today.

But now Japan has earned its first "tourism surplus" in 44 years – a testament to the transformation of Asia's economies that has turned once prohibitively expensive Japanese cities into affordable destinations for many middle-class Chinese, Thais and Indonesians.

Japan's aggregate tourism-related revenues exceeded expenditures by 17.7 billion yen ($172 million) in April, current account data released by the finance ministry on Monday showed, the largest such surplus on record and the first since July 1970.

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Tourism is helping to support a rebound in Japan's economy even as exports of manufactured goods, a more traditional source of strength, have lagged -- responding only weakly to a slide in the yen that has made them theoretically more competitive.

Asia's broader tourism shift has been under way for a number of years but it has accelerated since 2012, when the yen began a 20 per cent decline against other major currencies, further lowering the cost of everything from hotels to meals to shopping expeditions for foreigners. (Back in 1970, the Japanese currency was still vastly cheaper, at a fixed 360 yen to the dollar.)

Japan is attracting more holidaymakers from Europe and North America too but Asia is by far the largest source of visitors. The latest data on tourist numbers, from February, showed a near-doubling in the number from Thailand compared with the same month in 2013, and jumps of 50-60 per cent from Indonesia, the Philippines and Vietnam.

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The number of Chinese tourists swelled by 140 per cent in spite of political tensions between Tokyo and Beijing over wartime history and maritime territory. Popular anger at Japan exploded in China in late 2012 when Tokyo purchased a group of disputed islands from their private Japanese owner, but has subsided somewhat since.

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Tourism is seen as an important new area for economic growth for Japan, and the government has set a goal of doubling the number of tourist visits to 20 million by the end of the decade, when Tokyo is scheduled to host the 2020 summer Olympics. It has relaxed visa requirements for short-term visitors from a number of Asian countries to encourage easier visits.

Revised gross domestic product data released on Monday showed Japan's economy grew at an annualized rate of 6.7 per cent in the quarter to March, up from an initial figure of 5.9 percent. An upward adjustment in estimated business investment was the primary reason for the change.

First-quarter growth was inflated by a rush of consumer spending ahead of a sales-tax increase on April 1, and analysts expect the economy to suffer a post-tax-rise contraction in the current quarter.