The yen has slumped, and the Japanese economy has missed the usual influx of foreign tourists.
Prime Minister Fumio Kishida recently eased border controls, allowing the first batch of tourists in more than two years to enter. But even if the yen falls to its lowest level in more than 20 years, Japan has a long way to go to regain its pre-pandemic tourist numbers of nearly 32 million.
The world’s third-largest economy will miss out on big tourism dollars as a result. Direct spending by tourists in 2019 totaled 4.8 trillion yen ($37 billion), and the cash flowing into regions through the hotel industry might have a bigger impact. Japan’s economic recovery is currently lagging behind the rest of the G7.
Hidefumi Murota, who owns three fresh fish restaurants in Hokkaido, is feeling the financial pain from the devaluation of the yen, but his stores have not been compensated for tourist traffic. “The devaluation of the yen pushes up our costs,” he said. “At the same time, there aren’t any foreign tourists, and they usually spend more than the Japanese. Hopefully they’ll be admitted soon, they’re important to our region. “
Fumio Kishida said he intends to open up entry to the same level as the G7, a sign that Japan has stricter restrictions than other major economies. According to local media, the Prime Minister of Japan is considering opening the sights of foreign delegations as soon as June. But analysts don’t expect a big opening before elections this summer.
“It will likely take a year or more to normalize border controls,” said Masato Koike, an economist at Daiichi Life Research Institute. “Without these inbound travelers, we wouldn’t be able to ride on the weaker yen.”
Tourism, fueled by a weaker yen, has been a major driver of Japan’s regional economy. The yen-dollar exchange rate fell from an average of around 79.8 in 2012 to 109.03 in 2019, and then fell below the 130 mark, a 20-year low that might have prompted a further surge in tourist arrivals.
A JNN poll conducted over the weekend showed public opinion was beginning to favor easing border controls, with 48 percent in favor and 38 percent in opposition.
Figures for 2019 show that the largest number of foreign tourists came from mainland China, who accounted for more than a third of total tourist spending. However, regardless of the devaluation of the yen or Japan’s border controls, they will stay at home as long as the mainland conducts epidemic prevention and control.
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