Japan preparing to reopen to tourists, but industry's full recovery far off

If there is one thing that Japan did well to boost its lackluster economy prior to the pandemic, it would be growing inbound tourism.

Up until 2019, the country saw record numbers of foreign tourists annually for seven straight years.

Then the pandemic came, with Japan tightly sealing its borders for more than two years.

But Prime Minister Fumio Kishida announced Thursday that the country will finally start relaxing entry restrictions for foreign tourists starting June 10 — although it will be limited to package tour groups with chaperones.

The change in policy follows the start of small-scale test tours for foreign visitors earlier this week.

The easing of the closed-door policy may be a step toward reviving Japan's tourism industry, which has taken a severe hit from the pandemic, but it will likely still take awhile to achieve a full recovery, as the timing of the full reopening of the border remains uncertain.

Although Japan will raise the daily cap on new arrivals to 20,000, up from the current 10,000, starting in June, the government will likely remain cautious about completely eliminating it for some time, as public opinion is still somewhat split.

“Step by step we will aim to accept (tourists) as we did in normal times, taking into consideration the status of infections,” Kishida said Thursday.

Before the pandemic, inbound tourism and its economic impact had been steadily growing.

In 2019, Japan saw the number of foreign visitors reaching a peak of 31.2 million, with ¥4.8 trillion generated in tourism-related revenue. In 2012, 8.37 million foreign tourists arrived, spending ¥1.86 trillion.

“The ¥4.8 trillion economic impact is larger than the export of semiconductors and electronics parts, which means it is a big pillar sustaining the Japanese economy,” the Japan Association of Travel Agents said in a letter to the government earlier this month, requesting that it reopen the borders and scrap the daily entry cap.

The association said the impact of inbound tourism benefits not only tourism and hotel businesses, but also the transportation, restaurant, retail, agriculture and fishery industries, saying it sustains many regional economies and millions of jobs.

Yet due to the pandemic, the number of foreign visitors plummeted in the past couple of years, with the figure coming in at 4.12 million and 245,900 in 2020 and 2021, respectively.

Considering the recent decline in the yen’s value against various currencies, the current moment is actually a golden opportunity to welcome inbound tourists. The value of the yen against the U.S. dollar, for instance, has plunged to a 20-year low.

“The resumption of inbound tourism is expected to be accelerated, but benefits stemming from the weak yen will be nearly invisible as long as the daily cap on new arrivals remains intact,” said a report on Japan's economic outlook released by the Daiwa Institute of Research on Tuesday.

Despite the strict border policies over the past two years, Japan's reputation as a travel destination seems to be improving.

The country for the first time topped the World Economic Forum's Travel and Tourism Development Index, scoring high for its cultural resources and infrastructure.

Although the weakening of the yen and that ranking may bode well for when borders are more fully reopened to foreign tourists, whether the general public is ready for that change is another matter entirely.

According to a survey by JTB Tourism Research and Consulting in March covering 6,583 people, nearly half of the respondents gave a negative response to the prospect of accepting inbound tourists.

The survey showed that 23.9% did not want to accept tourists from other countries even if they are vaccinated, and 23.6% said they would prefer it if tourists do not visit.

Those welcoming foreign tourists stood at 16.2%, while 28.9% said they want visitors to come but have concerns about them doing so.

Nonetheless, some economists say that inbound tourism is critical for the growth of the economy.

Takahide Kiuchi, executive economist at the Nomura Research Institute, urged the government to come up with a new inbound tourism strategy in a blog post for the organization Friday.

The government needs to reassure tourism-related businesses that inbound demand will grow sustainably, he added — otherwise they will be hesitant to make investments.

Prior to the pandemic, a large portion of foreign tourists were from China and South Korea, but Kiuchi said Japan should make efforts to attract more visitors from a wider range of countries, since fragile diplomatic relations with those two neighbors could at times affect the the flow of tourists.

Adding impetus to such a transition, China has implemented an effective ban on international travel in its fight against the pandemic, with the world's second-largest economy pursuing a "COVID zero" policy.

“Reviving inbound demand should be clearly stated as one of the crucial policies of Japan's growth strategy,” Kiuchi said.