Abenomics: A Midterm Evaluation

Getting Serious About International Tourism

Economy Society

With the 2020 Olympics approaching, the Abe government has laid out ambitious plans to turn Japan into one of the world’s top tourist destinations. What will it take for this island country to triple tourist arrivals over the next 15 years?

Among the more promising economic policies announced by the government of Prime Minister Abe Shinzō as part of its revitalization strategy is an initiative to transform Japan into a top global tourism destination. There are numerous reasons for optimism regarding government initiatives in this sector. One is the fact that tourism is a global growth industry. Another is the fact that serious government efforts to promote tourism date back only a decade, suggesting that there is still plenty of room for growth. In addition, the tourism industry is one of the sectors most responsive to government policy, benefiting substantially from such interventions as the relaxation of visa requirements, development of transportation infrastructure, and centralized promotional campaigns.

In the Abe cabinet’s initial Japan Revitalization Strategy (subtitled “Japan is Back”), released in June 2013, the government adopted the target of increasing the annual number of foreign visitors to Japan to more than 30 million by 2030. In the amended plan released in June 2014, it added the interim target of 20 million visitors by 2020.

The government’s tourism strategy is fleshed out in the 2014 Action Program Toward the Realization of Japan as a Tourism-Oriented Country, released last June. The plan established a new ministerial council to promote tourism in Japan and outlined a set of policy measures grouped under the following six headings:

  1. Promoting tourism with an eye to the 2020 Tokyo Olympics and Paralympics.
  2. Implementing measures to drastically expand inbound tourism.
  3. Facilitating travel to Japan through such measures as relaxing visa requirements.
  4. Developing world-class tourist regions.
  5. Creating an environment friendly to foreign travelers.
  6. Attracting business travelers by promoting Japan as a venue for international meetings, incentive travel, conferences, and events (MICE hosting). 

Still, questions linger about this aspect of Abe’s growth strategy. Is 30 million foreign visitors a year a realistic target? What will it really take to turn Japan into a top global tourist destination? In the following discussion, I hope to provide a few answers to these questions.

Fostering a New Core Industry

Tourism has played only a peripheral role in the Japanese economy until now. Its emergence as a focus of industrial policy dates back only to 2003, when then Prime Minister Koizumi Jun’ichirō announced an initiative aimed at turning Japan into a “tourism-based country.”

There were good reasons for the government’s decision to emphasize tourism. First, the economic benefits of tourism can be substantial. Second, international tourism is a quick and relatively cheap way of securing foreign currency reserves. Third, global demand is expanding rapidly—especially in emerging markets—thanks to rising incomes, an increase in leisure time, and the development of affordable modes of transport (figure 1). Fourth, tourism is an industry with the potential to revitalize Japan’s languishing rural economies.

Recent figures are encouraging. In 2013, the number of foreign visitors to Japan hit 10.36 million, topping the 10 million mark for the first time ever (figure 2). Brisk economic growth in neighboring countries and the yen’s depreciation played a role, along with the launch of the Visit Japan campaign, the expansion of airline services, and the relaxation of visa requirements for Southeast Asian travelers. The trend has continued into 2014, with a 20% year-on-year increase for the period from January through August.

Still Lagging

Such progress notwithstanding, Japan has a long way to go to achieve the status of top global tourist destination. In 2013, it ranked just 27th in the world and 8th within Asia in number of tourist arrivals (figure 3). No one expects to rival China (55.7 million arrivals), with its vast territory and its wealth of historical and natural attractions. But there is something amiss when Japan lags behind even tiny entities like Hong Kong, Macao, and Singapore as well as countries like South Korea, which is not especially known for its tourist attractions.

As mentioned above, the government is shooting for 20 million visitors by 2020 and 30 million by 2030. In 2013 terms, these numbers correspond to the performance of 15th-ranked Mexico and 8th-ranked Britain, respectively. Are such targets reachable?

Certainly they are ambitious goals. The World Tourism Organization (UNWTO) projects a 3.3% average annual increase in global tourism between now and 2030. If the number of visitors to Japan increases at the same rate, it will barely top 13 million by 2020. A substantially higher rate of growth will be needed to meet the Abe cabinet’s targets.

Fortunately, Japan can count on surging demand from nearby China and Southeast Asia. It also enjoys some distinct advantages as a tourism destination, being one of the safest countries in the world and boasting numerous hot-spring spas, ancient temples and shrines, and beautiful scenery for every season—not to mention the appeal of anime, video games, and other aspects of popular Japanese culture.

With these factors in mind, I would like to use the 2014 Tourism Action Program as a framework to review the basic changes Japan needs to make in order to join the ranks of the world’s top tourism destinations.

Visa and Immigration Reforms

Of the policy steps outlined in the 2014 Tourism Action Program, two that have received particular attention are “facilitating travel to Japan by relaxing visa requirements, etc.” and “creating an environment friendly to foreign travelers.”

In terms of “facilitating travel to Japan,” the key steps are targeted relaxation of visa requirements and streamlining of entry and exit procedures. The need to apply for a visa before each trip to Japan is a major annoyance for foreign tourists and business travelers alike. Offering more countries visa exemptions or the option for multiple-entry visas seems like a surefire way to boost the number of visitors to Japan. That said, the government is concerned that a radical easing of visa requirements could open the door to illegal immigration and an increase in crime. For this reason, it has gradually loosened requirements over the past year or so, with a focus on Southeast Asia, in order to monitor the results. Between July 2013 and July 2014, Japan eased regulations for travelers from 11 countries, including Thailand (visa waiver), Malaysia (visa waiver resumed), Vietnam (multiple-entry visas), and India (multiple-entry visas). Travel from countries like Thailand and Malaysia, which are exempted from visa requirements, has shot up in the past year. The government is hoping to institute waivers for Indonesia, the Philippines, and Vietnam at the earliest possible date.

Streamlining entry and exit procedures at airports would have a significant impact on international visitors’ impression of Japan. The 2014 Tourism Action Program includes plans to allocate additional funds and personnel for customs, immigration, and quarantine with the goal of shortening the time required to clear these hurdles at international airports to a maximum of 20 minutes. If implemented, such streamlining would go a long way toward encouraging repeat visits.

Making Japan Tourist-Friendly

Under the heading “creating an environment friendly to foreign travelers,” the government has drawn up a roadmap for some important changes that Japan must make if it is to become a top tourist destination: improving and expanding transportation access within Japan, building more hotels and other accommodations, making Japan’s cities and communities more welcoming to foreign visitors, and making shopping more convenient for foreign travelers. The policy measures with the highest potential for short-term benefits here are enhancement of Japan’s multilingual environment, expansion of free public wireless LAN service (WiFi), and expansion of tax-free shopping.

Japan can do much to improve the multilingual environment for international travelers. Until recently, many signs have displayed only transliterations of location names, such as “Kokkai”—meaning “National Diet”—underneath the Japanese. Transportation authorities, museums, and other facilities could make Japan considerably more tourist-friendly by enhancing the use of multilingual signage, maps, and pamphlets.

Another common complaint of foreign visitors is poor Internet connectivity. International tourists like to post photos and impressions of their travel experiences on social media using laptops and smartphones, but in Japan public WiFi access is generally limited to subscribers. Under the 2014 Tourism Action Program, the Ministry of Internal Affairs and Communications and Japan Tourism Agency are working together to create a mechanism for expanding free public WiFi access. Japan could significantly boost its appeal to tourists by creating more WiFi hotspots at train stations, tourist spots, and shopping centers and making sure travelers know about them.

Overcoming the Tax Drag

Another promising measure is the expansion of tax-free shopping for foreign tourists, an initiative begun this past October. Among Asian travelers in particular, Japan is a popular shopping destination with a reputation for selling only genuine articles (as opposed to cheap knockoffs of Western brands), treating customers with courtesy, and offering high-quality goods (Japanese cosmetics, etc.) at reasonable prices. But until recently, tax-free shopping was limited to durable goods (consumer electronics, apparel, accessories, etc.) and applicable only to purchases in excess of ¥10,000.

In October, however, the scope of tax-free shopping expanded to include such consumables as food, pharmaceuticals (prized by Asian travelers because of their high quality), and cosmetics. For these newly exempt items, the minimum tax-free purchase is more than ¥5,000, while the maximum ¥500,000. (For durable goods, the minimum is still more than ¥10,000.) By 2020, the year of the Tokyo Olympics, the government plans to double the number of tax-free stores to about 10,000. Thanks in part to these measures, spending by foreign visitors is on track to set a new record, raising hopes that foreign tourists can keep the economy rolling despite the braking effect of the consumption-tax increase.

“Developing world-class tourist regions,” while a laudable goal, is going to take a bit more time and effort to achieve. Most of the world’s top tourist areas draw travelers not by virtue of a few scattered destinations but by a series of thematically linked attractions that tourists can easily visit in succession: Germany’s Romantic Road and the chateaux of France’s Loire Valley come readily to mind. While there are moves afoot to build regional tourism partnerships, such as the Japan Tourism Agency’s “tourism zone” initiatives, most efforts to develop tourist resources still occur at the prefectural or municipal level, making the goal of world-class tourist regions a distant dream.

Making It Happen

As an island country, Japan must go all-out to improve transportation access if it hopes to compete head to head with the world’s top tourist destinations. In March 2014, the number of landing slots for international flights at Tokyo’s Haneda Airport increased by 50% to 90,000. Yet even so, Japan has nowhere near the capacity to receive 20 million visitors, let alone or 30 million. To meet those targets it will need to provide more and better access to low-cost carriers at Narita, Chubu Centrair, and Kansai international airports, make better use of regional facilities like Ibaraki Airport, and make its seaports more attractive to the major cruise lines.

Hotel accommodations are also expected to be an issue. Japan will need to boost its capacity by a variety of means, including a more welcoming attitude toward foreigners on the part of Japanese-style inns.

Meanwhile, as the 2014 Tourism Action Program notes, a major event is looming on the horizon: the 2020 Tokyo Summer Olympic Games and Paralympics. This author is skeptical about the long-term economic benefits of the Olympics per se, but if the prospect of the games motivates Japan to get serious about international tourism, they will have served a good purpose.

Japan’s efforts now should focus on building its airport and seaport infrastructure, expanding free WiFi access, and creating a tourist-friendly multilingual environment by 2020. If it meets these challenges, the goal of 30 million foreign tourists is not out of reach.

(Originally written in Japanese on October 20, 2014. Banner photo: Kyoto’s Nishiki Market, a favorite shopping spot for foreign tourists. © Jiji.)

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