Hideki Matsumura, chief senior economist at the Japan Research Institute Ltd., spoke with The Yomiuri Shimbun about the effect foreign tourists are having on the Japanese economy and strategies to further increase their numbers. The following is excerpted from the interview.
Higher Asian incomes spur boom
The increase in the number of foreigners visiting Japan has been remarkable over the last five years. The number reached a record high of 28.69 million in 2017, or 3.4 times the number in 2012.
The Yomiuri Shimbun: Why have we seen such an increase in recent years?
Matsumura: The number of foreigners visiting Japan is increasing rapidly, with the growth in visitors from Asia particularly noticeable. However, the numbers are expected to plateau sometime in the future and strategies to achieve further increases will be required.
Viewed by country, Asian visitors accounted for 85 percent [in 2017], an increase of as much as 10 percentage points over five years. Contributing factors include relaxations in entry visa requirements and more budget airline routes that make traveling to Japan easier. The major factor, however, is the development of Asian economies and the consequent wealth of their people, who now are able to afford international travel.
International travel involves significant expense, which means that even though potential demand may exist, it will not surface until certain income levels are achieved.
It has been pointed out that, until now, the number of tourists visiting Japan from other countries has been relatively small in comparison to the number of Japanese traveling abroad. A major factor impacting this, however, has been low income levels in Japan's neighboring countries. France is considered a superpower for tourism, but unlike Japan, it is surrounded by numerous countries that enjoy high income levels. It is blessed with a healthy demand for tourism.
Purchasing power in Japan has also increased from a foreigner's perspective, due to the expansion of Asian economies and the weaker yen. The top five countries and regions in terms of visitor numbers to Japan in 2017 are China, South Korea, Taiwan, Hong Kong and the United States, in that order. The yen has depreciated by over 30% against the currencies of all these countries and regions over the past five years.
Lull in the impact of the weak yen
The government has stated targets of 40 million foreign visitors to Japan in 2020 and 60 million in 2030.
Q: Will we see continued increases in the number of foreign visitors to Japan?
A: In order to achieve these targets, tourist numbers will have to increase by 12 percent each year over the following three years. However, there is actually a high likelihood that the rate of increase in the number of foreign visitors to Japan will slow down over the short term. I feel that the past five years, which saw an average annual increase of close to 30 percent, represent something exceptional.
First of all, the effect of the depreciation of the yen that supported this sudden increase will come full circle. Since 2016, the rate has seesawed, with the yen returning to its high value relative to other currencies. For the time being, we cannot assume that the yen will continue to lose value at a rapid pace.
Secondly, the number of visitors from Asian countries and regions, which have been leading this trend, is starting to approach its upper limit. The annual number of visitors to Japan, proportional to population figures, has reached a high level: 30 percent of the population for Hong Kong, 19 percent for Taiwan and 14 percent for South Korea. When we consider the case of France, where the number of tourists visiting from major neighboring countries accounts for 10–20 percent of their populations, we can see that there is almost no room for numbers from these countries and regions to increase further.
However, there is still potential demand that can be tapped. Thailand, the Philippines, Vietnam and Indonesia have a high potential for future economic growth, and incomes in these countries will also increase. China satisfies all the conditions. It has the size of population, the capacity for further economic growth and is close in proximity to Japan. It is expected to become a massive driving force.
Godzilla statue and gyudon
Q: Is Japan sufficiently prepared for foreign visitors?
A: What is required to further increase the number of foreigner visitors to Japan?
Transportation in Japan is already sufficiently developed in comparison with other countries, and hotels are being built one after the other, primarily in urban areas. Even so, Japan still does not have enough harbors that can accept luxury liners.
Many foreigners say Japan is insufficient in terms of foreign language-based service in shops and facilities and in providing environments where visitors can connect to the internet. Practical steps need to be taken about necessary expenses--the installation of public wireless LAN to allow for free access to the internet, and the facilitation of cashless payments, an area where Japan lags behind the West.
In addition, it will be important to increase opportunities for the consumption of experiences of the kind that can only be enjoyed in Japan, rather than the consumption of commodities only. Many of the Chinese who visit Japan have become repeat customers. We need to be constantly creating new highlights to hold onto such repeat visitors through experiences that can only be enjoyed by visiting Japan.
One such area is the enhancement of nighttime sightseeing, for which there is a high demand from foreigners. The Samurai Museum, an experiential tourist facility located in Shinjuku, Tokyo; the big Godzilla statue; and the Robot Restaurant, which features a show by robots and dancers, have become sightseeing spots. Eating out in shops and restaurants, one can easily appreciate cultural differences, and this is also an industry that has a lot more room for expansion. Not only sushi, but many other dishes are convenient for and popular among foreigners, including ramen, with the many flavors it offers to enjoy, and gyudon beef bowls made with tender beef.
Foreigners are attracted by the accuracy of Japan's train timetables and the cleanliness of its streets, in addition to other things that people like us who live in Japan cannot even begin to imagine.
In Japan, where the population continues to decline, I feel that there is no area remaining that can match the hidden potential of the market for foreign visitors to this country. The daily level of consumption for foreign visitors to Japan is several times that of Japanese people. Tourists come to Japan to have a good time, and it is natural for them to spend a lot of money. This brings benefits to many different industries.
However, cities such as Kyoto have already come close to their limits in being able to host tourists. We need to consider the issue of diversity of tourist spots throughout the whole country. This depends on how much we use our ingenuity, not only on the part of the national government in its leadership role, but also on the part of companies and local governments.
-- This interview was conducted by Yomiuri Shimbun Staff Writer Hajime Yamagishi.
-- Hideki Matsumura / Chief Senior Economist at the Japan Research Institute
Graduated from the University of Tokyo in 1992 and joined Sumitomo Bank Ltd. (now Sumitomo Mitsui Banking Corp.). Joined the Japan Research Institute in 1997. Took up present position in August 2016. Also heads the Macro-economics Research Center of JRI. He is 49 years old.
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