2020 Olympic Games effect takes hold in Japan
Many remain sceptical about the Japanese Stock Market, but few can doubt the impact of overseas tourists on Japan, with more than 13 million visiting last year alone.
It is estimated that the Chinese New Year in February will have seen record numbers of Chinese shoppers flock to Japan in search of a bargain. As we begin the countdown to the start of the 2020 Olympics in Tokyo, latest growth figures* for tourism in Japan look to be just the beginning of the industry’s role in boosting economic growth.
Assuming that the current exchange rate is maintained, and using the rate of incoming Asian tourists today, we could see 25 million tourists visiting Japan in 2020, the year of the Olympics, surpassing the target of 20 million set by the Third Arrow of Abenomics.
While Japan is now technically out of recession, the drag from the consumption tax hike continues to be felt in slower GDP growth. However, Japan has avoided a repeat of the full-scale recession it experienced in the mid 1990’s and even though domestic demand remains weak, we are seeing a beacon of hope from the positive effects of a weaker Yen in the form of foreign tourist receipts.
Why are foreign tourists coming to Japan?
1) The end of the strong Yen era which has seen the Yen fall 50% from its peak in 2012 making it a much cheaper destination;
2) The relaxation of visa requirements for people from Thailand and Malaysia in 2013 and for Indonesians, Filipino’s and Vietnamese in 2014;
3) The expansion of international flights, which have increased from 2,296 per week in 2003, to 3,477 in 2013. Haneda Airport is now a busy international airport, whereas until 2010 it had been just a domestic hub.
According to the Japan Department Store Association, monthly duty-free sales for the months of December 2014 and January 2015 reached JPY 12 billion, not taking into account sales to Chinese tourists visiting Japan for the Chinese New Year, which could see all time high figures for February.
The media often broadcast scenes of large crowds of Asian tourists shopping at department stores such as Isetan, Mitsukoshi, Takashimaya, Daimaru and Matsuya and it is now becoming the norm that overseas tourists outnumber Japanese shoppers. It is not only department stores but also drugstores and electronics stores that are feeling the benefits of the weaker yen and Japan’s emergence as a go to destination for tourists with cash to spend.
Genzo Kimura is economist at SuMi TRUST