International vs Domestic: Where Does Japan’s Allegiance Lie?

The past two years have proven to be challenging not only for private enterprises and the public but also for the government. Now, a regulatory meltdown is in order. After an extensive period of the closed border policies, Japan is set to welcome back international travelers. Starting from June 10, foreign tourists traveling via packaged tours can enter the country.

Hospitable as these policies might seem, the government’s priority still lies in boosting domestic tourism numbers, said Tadashi Shimura, President of the Japan Association of Travel Agents. This is not surprising: according to JATA, domestic tourism has always contributed far more to the country’s gross domestic product.

In terms of the overall numbers, the industry added 28 trillion yen ($211 billion) to Japan’s economy in 2019, with nearly 80% — or 22 trillion yen — coming from domestic travelers, according to a recent report by Japan Tourism Agency. A more impressive fact is that despite a rise in Covid cases in 2021, tourism spending from Japanese locals still managed to bring in 9.2 trillion yen that year.

Nevertheless, the government is still very much interested in increasing international arrivals, especially given the heavily hit hospitality, transportation, and travel sectors, said Shimura. Japan welcomed about 32 million foreign visitors in 2019 and had been on track to achieve its goal of 40 million in 2022, said Ejaz Ahmed, a research analyst at the Economist Intelligence Unit.

However, arrival numbers plummeted rapidly due to the pandemic, and there were as few as 250,000 foreign visitors in 2021. Such a huge decrease cost Japan “about 10 trillion yen over the past two years,” said Shimura, as international students and long-term foreign residents used to infuse the economy with an average of 4.3 million yen per person per year, he said, citing a report by Nomura Research Institute.

Travel agencies in Japan are getting prepared for the return of tourists with packaged tours to some of the most popular destinations across the country. There will also be a cap on the number of daily arrivals. Including both Japanese nationals and returning foreign residents the cap was expanded from 10,000 to 20,000 on June 1st, according to the Japan National Tourism Organization. Going further, local reports indicate this limit may be increased to 30,000 people in July.

Overall, it seems like the Japanese economy is poised to gain from this policy change. Hopefully, the changes will produce long-lasting effects, and new socio-economic, political, and health-related global shocks are not waiting for us just around the corner.