The rapid growth in consumption by inbound tourists, a boon for the retail industry at a time when domestic consumption remains weak, is losing steam even as the number of visitors to Japan keeps rising. This can be explained with a variety of reasons, including the yen's recent strength, decelerating growth in China and changing spending behavior by tourists themselves. The government has floated robust targets for doubling the number of incoming tourists and their consumption by the time Tokyo hosts the Summer Olympics in 2020. Policymakers and businesses should grasp what the slowdown in spending means and consider appropriate responses.
According to the Japan Tourism Agency, 14.01 million tourists arrived from overseas during the January-July period, up 26.7 percent from a year ago. The agency thinks the government and private-sector campaigns to promote inbound tourism for vacation seasons have paid off, offsetting negative factors such as currency fluctuations and the steep slowdown in the economic growth of China, from which nearly 5 million people visited Japan last year.
Consumption by inbound tourists rose 31.7 percent year-on-year during the January-March period, but that growth decelerated to 7.2 percent in the second quarter. Per tourist spending fell 5.4 percent in the first quarter and plunged 9.9 percent in the April-June period.