In Kyoto recently for business, I was struck by how much happier the residents seemed than a year ago, despite the ancient city being in the middle of a pandemic. Even owners of businesses that supposedly benefit from inbound tourism appeared to be enjoying a break from the hordes of overseas visitors who previously crowded the city’s streets and temples.

The economic benefits of inbound tourism are typically overstated for two reasons. First, most measures fail to split out domestic tourism, which in Japan is a bigger contributor to the economy than visitors from overseas. Second, the measures generally don’t consider the “crowding out” effect: When tourist attractions become overcrowded, some domestic tourists choose to stay home instead. Adjusting for these factors, an analysis shows that even with last year’s record arrivals, inbound tourism contributed less than 1 percent of Japan’s gross domestic product in 2019.

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