Japan banks on inbound tourism for travel growth

Published May 2018 Analyst: Coney Dongre

 

Japan banks on inbound tourism for travel growth

Japan is Asia Pacific's second-largest travel market, and is expected to remain so for a long time; the growth markets of Southeast Asia and India still have a long way to go to catch up. But Japan is facing significant growth challenges. Its total travel market is projected to clock a compound annual growth rate (CAGR) of just 2% from 2017 to 2021, compared to 10% for China and 9% for India, the region's biggest growth engines.


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The silver lining for Japan's travel industry? Facing stagnation, population decline and GDP growth rates below 1%, the government is prioritizing travel to help see the nation through stark economic times. While domestic travel is being encouraged with various subsidies for travelers, inbound travel has the bigger potential payoff. The Japanese National Tourism Organization's targets are ambitious and extend out more than a decade: 40 million(1) international visitors a year by 2020; 60 million(1) visitors a year by 2030; and JPY 8 trillion(1) in spending by overseas visitors by 2020.

And the country has been showing promising inbound visitor growth. Japan received 26.2 million(2) international visitors from January to November 2017, 19% higher than the same period in 2016. The weakness of the yen is helping make Japan, already a popular destination, into a more affordable one. Proximity to the massive and still-rising Chinese source market has been a major boon. And over the next few years, Tokyo's upcoming turn as Olympic host (2020) will help with visibility and infrastructure projects, as well as drawing huge numbers of visitors before and during the Games. The Japanese travel market is projected to expand 5% to $108 billion in 2020, before a post-Olympics correction brings it down to $106 billion in 2021.

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Sources
(1) Japan doubles overseas tourist target for 2020, The Japan Times
(2) Japan-bound Statistics, JTB Tourism Research & Consulting Co.