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In-depth Abenomics: A Midterm Evaluation
Getting Serious About International Tourism

Nagai Tomomi [Profile]


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.

  • [2014.12.11]

Senior analyst, Toray Corporate Business Research. Graduated from the University of Tokyo in 1986. Has worked in the foreign business division of Yamaichi Research Institute of Securities & Economics. Has served on the Financial Services Agency’s Business Accounting Council since 2005.

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  • How Can Trend Growth Be Revived?Raising Japan’s trend growth rate will require the steady implementation of growth strategies, the third arrow in the Abenomics quiver. But policies touted as growth strategies often serve only to protect established businesses, obstructing the entrance of innovative rivals and actually impairing trend growth. The main shortcoming of Abenomics is the shelving of social welfare reform. If welfare costs continue to accelerate, capital formation will stagnate and trend growth could turn negative.
  • Bolder Reforms Needed to Drive Abenomics ForwardFinancial markets have responded favorably to Prime Minister Abe Shinzō’s policies, and asset prices are up, but real wages are still declining. To achieve a solid recovery, higher productivity and bold structural reform will be essential.

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