On the 17th of January, the Japanese National Tourism Organization (JNTO) announced their estimation of the number of foreign visitors to Japan in 2016. According to the announcement, 2016 saw a 2.4 million more tourists visiting Japan, a 21.8% rise compared to the previous year. Considering that the increase between 2014 and 2015 was 47.1%, the rate of growth last year can be seen as somewhat slower.
On top of this, a survey of the consumption trends of foreign visitors to Japan announced at the same time revealed that trip expenditure (preliminary figures) had increased by 3,9047.6 billion yen, a 7.8% increase over the previous year. With expenditure per each traveler decreasing by 11.5% to 155,596 yen, this caused a two digit decrease. The receding growth rate, along with the decrease in expenditure and the continuing rapid rise of the yen seems to have had a big impact. Further, with the 16.5% increase in expenditure per head in 2015 being inflated due to the boom of "explosive buying" of electronics and luxury goods by Chinese tourists, it is perhaps natural to see a reaction to that fact.
Under the 2012 "Tourism-based Country Promotion Basic Act", various measures have been taken to achieve the set goal of "40 million foreign visitors to Japan per year by 2020". Some of these include the relaxation of visa issuance requirements, and the un-banning of Airbnb style guest houses in certain "special economic zones". In December of last year, a proposal to proceed with development of comprehensive resort facilities that included a casino (Commonly known as the "Casino bill" in Japan) was roundly criticised by the press and opposition party, but it too can be thought of as an action to try and encourage more visitors to Japan.
If the number of tourists continues to increase by 20% per year, the target of 40 million will be reached in 2019. Even in the aftermath of the Kumamoto earthquake in April of 2016 and the sudden rise in the yen, an increase of 21.8% was still maintained. Considering this, keeping a pace of 20% increase per year over the next 3 years doesn't seem impossible. Of course, in order to achieve this goal, a combined effort of both public and private sectors for further deregulation, along with traffic and accommodation infrastructure will be needed.
However, no matter how hard the government or Japanese private companies continue to work, a sudden swing towards appreciation of the yen in the currency market could scupper their plans. This is because a sharp increase in the yen is directly connected to a decline in people's motivation to visit Japan, and their level of consumption when they do.
So, how will the vital entity that is the currency market move? One thing that can be said, is that if President Trump carries out the large scale tax cuts and infrastructure investment he has proposed, then the American economy will improve. If this is the case, there would almost certainly be a temporary shift towards a high dollar - low yen situation. However, it is also clear that the high dollar would be a hinderance to the "resurgence of the manufacturing industry" and "expansion of employment" that President Trump so loudly pushes for. This is because a high dollar would greatly damage export industries, particularly cars. This contradiction makes predicting the exchange rate difficult.
In this column, we have talked about the increase of foreign tourists to Japan and its positive effect on the real estate market. This is because the increase in customers leads to more retail stores and accommodation facilities being developed, accelerating urban redevelopment, and the promotion of deregulation related to real estate, etc. What strongly influences the number of tourists is the exchange rate and if Trump is the one who holds the key to that rate, then it could be said that the cards he plans to play are also of vital importance to the Japanese real estate market. Either way, this will be a year where close attention needs to be paid to the number of tourists coming to Japan, and the exchange rate.
Jan. 24, 2017