Booming tourism broadens scope for FDI into Japan

Japan’s tourist industry is flourishing as the number of visitors attracted to the land of the rising sun and cherry blossom, particularly those from Asian countries, continues to grow year on year beyond even the most optimistic expectations.

The government, led by prime minister Shinzo Abe, is now looking to capitalise on the growing trade and investment opportunities this new wave of Asian tourists brings, and has already eased several regulations to encourage further visits and consumption.

The number of foreign visitors to Japan reached a record 19.7 million in 2015, up from 13.4 million and 10.4 million in 2014 and 2013, respectively, according to figures from the Japan National Tourism Organization (JNTO). They continued to rise throughout 2016, and are on track to set new records as visitors reached 11.74 million in the first half of the year, exceeding the 10 million mark for this period, JNTO estimates show. On top of this, the figure for July alone was 2.3 million visitors.

Asian visitors

Seven in 10 tourists visiting Japan come from Asian countries, particularly from China, which accounted for 4.99 million visits in 2015, South Korea (4 million), Taiwan (3.68 million) and Hong Kong (1.52 million).

“The increase shows that Japan’s reputation as a tourist destination is taking root despite the tendency of a strong yen,” the Japan External Trade Organisation (Jetro) said in its 2016 Invest Japan Report.

“The rapid increase of tourists may be a result of various measures including a relaxing of visa requirements for 14 countries with a focus on the Association of South-east Asian Nations [region]; a great increase in the landing slots at Haneda and Narita Airports; and an expansion of exemption of consumption tax for foreign tourists to cover consumables including foods, drinks and cosmetics.”

Investment opportunities

The growing number of Asian visitors to Japan is quickly translating into growing consumption levels. Their total spending in the country increased to Y3500bn ($30.6bn) in 2015, up by 47% from a year earlier. The government is now aiming at reaching 40 million visits, with total spending of Y8000bn, by 2020.

“In order to continue the increase of foreigners visiting Japan experienced in these [past few] years, it is necessary to make their trips more comfortable by revising our tour guide-interpreter system, deregulating vacation rental rules, further relaxing visa requirements, utilising high-speed transportation, and improving the convenience of our airports, in addition to unearthing local tourism resources and developing tour routes,” Jetro suggests in its report.

“Some of the issues, such as the regulation of the tour guide-interpreter system, have already been taken up by the Council for Regulatory Reform, and a bill to eliminate the monopolistic status of tour guide-interpreters is scheduled to be proposed in parliament. The point is to increase visitors from regions outside Asia, repeat tourists and long-term visitors.”

Foreign interest

The growth in visits from Asian countries is also driving new investment into the tourist sector from foreign investors looking to capitalise on the renewed interest in Japan from its neighbours. Among others, China’s Shanghai Spring Investment Management teamed up with Sun Frontier Fudousan to open an urban hotel in the Aichi prefecture to tap into the growing demand for hospitality services there.

Ctrip, China’s largest online travel agency – which has just taken over UK travel price checking business Skyscanner for £1.4bn ($1.76bn) – increased its footprint in the country with a second office in Osaka, in addition to the company's Tokyo operations. Rival Trip Advisor has also opened up in Japan with a Tokyo office. Meanwhile, another Chinese investor, consumer electronics and home appliance retailer Suning Commerce group, has unveiled plans to open 26 new duty-free shops across Japan.