The Future of Tourism in Japan
A weak yen is changing Japanese society, prompting pushback and new ideas.
Cover photo: Crowds move through the tourist street of Sannenzaka near Kiyomizu-dera, Kyoto, Japan (2024). Photo by Shoko Takayasu and via The New York Times (color-corrected).
Intro
Scrolling social media, it seems like everyone is in Japan right now. It’s not just algorithms — a record 3 million inbound tourists visited the nation last March. There are no signs of this trend slowing, with a consecutive 3 million visitors in both April and May.
The land of the rising sun has long been a top travel destination thanks to its compelling offering of culture and cuisine, but it has become more popular than ever due to the recent devaluation of Japan’s currency.
Compared to the yen’s value prior to the COVID-19 pandemic, tourists from many “western” countries are enjoying Japan discounted over 30% — affecting the tourism industry and society-at-large. Why is this happening and what does the future hold for Japan?
Devaluation
Why is the yen so weak? The short answer is because the Bank of Japan (BOJ) has the lowest interest rates among G10 nations, hovering around 0%. Investors have been selling off the yen in favor of currencies offering higher returns, leading to devaluation. The yen has fallen to a 37-year low against the U.S. dollar, causing Japan to fall behind Germany to be the world’s fourth-biggest economy.
Why now? Japan has had negative interest rates for over a decade but the gap between the BOJ and other banks has widened sharply post-COVID. To counter inflationary pressures, both the European Central Bank and Reserve Bank of Australia have raised rates to about 4% and the U.S. rate is now over 5%. Meanwhile, Japan has experienced relatively low inflation and low wage increases, hence low interest rates and a weakening currency.
Yen Currency Exchange Per Year
A weak currency benefits the tourism industry and large exporters — carmaker Toyota reported record profits in May — but it also raises the price of imports such as food and energy (it’s even raising the price of land).
Japan’s only options to raise the value of the yen are raising rates or currency buybacks. The BOJ has already intervened in global markets several times this year to keep the yen from sliding past 160 against the dollar. The goal is for inflation to grow, leading to wage hikes, and lastly sustainable rate increases — it’s a delicate process.
Economy
Meanwhile foreign tourists are reaping the benefits of a weak yen. Visitors are spending a record average of 210,000 yen (about 1,300 USD) per person, per stay — that’s up from 160,000 yen prior to COVID-19, but it’s roughly the same in terms of dollars due to the fluctuating exchange rate.
Prior to COVID-19, Japan’s tourism industry represented just 2% of the nation’s gross domestic product (GDP) — half the G7 average of 4%. Foreign tourist spending rose to account for 9% of the nation’s GDP last year. Government officials are confident that tourism is the key to economic growth in Japan, teetering on the edge of recession.
Overtourism
The growing numbers of visitors has lead to complaints of overtourism. A majority of tourists stay in just three metropolitan areas: Tokyo, Osaka/Kyoto, and Nagoya. The spirit of omotenashi — Japanese hospitality — is wearing thin thanks to crowded public transport, higher hotel prices, littering, trespassing, and even the obstruction of traffic.
In Kyoto, visitors are crowding buses, markets, and izakaya (bars), displacing locals. Tourists have also been accused of harassing geisha — traditional entertainers. In response, the city is restricting access to private alleys in the popular Gion district and introducing a new “Sightseeing Limited Express Bus” to help alleviate congestion.
Mount Fuji made international headlines after the town of Fujikawaguchiko installed a black screen to deter tourists from taking photos at a convenience store, Instagram-famous for its scenic view. Reportedly, visitors were obstructing the sidewalk and jaywalking. One local says, “we are all very concerned about accidents.” Yamanashi Prefecture has also instated a 2,000 yen (about 13 USD) toll to scale the active volcano — arguably the world’s most-climbed mountain — with a visitor cap of 4,000 people per day.
Recently, over a dozen cities across Japan have chosen to introduce accommodation taxes, including Hatsukaichi, home to the UNESCO World Heritage site of Itsukushima Shrine. Ranging from 100 to 300 yen (about 0.60 to 1.90 USD) per person, per night, funds raised help pay for tourist services such as information centers.
Dual-Pricing
The latest idea has proven to be the most controversial: dual-pricing. Himeji Mayor Hideyasu Kiyomoto has proposed raising the entrance fee to Himeji Castle from 1,000 yen (about 6 USD) to nearly 5,000 yen (about 30 USD) exclusively for foreign tourists, who account for about 30% of visits. He argues it’s unfair to burden locals — who enjoy the UNESCO World Heritage site as their “backyard” and volunteer for clean-up events — while it’s a once-in-a-lifetime experience for tourists.
Dual-pricing, or two-tier pricing, is often associated with “poor” or “developing” countries, but it is also employed in Singapore, one of the world’s wealthiest cities. The popular attraction Gardens by the Bay charges “residents” 20 SGD (about 15 USD) and “non-residents” 32 SGD (24 USD) for entrance to the Cloud Forest and Flower Dome.
One restaurant in Tokyo has already introduced such measures. The hands-on seafood buffet Tamatebako charges foreign travelers over 1,000 yen (about 6 USD) more as compared to Japanese residents. Owner Shogo Yonemitsu argues the charge is justified because foreigners require more service and instruction.
Visitors to Japan by Region (May 2024)
According to a recent survey, about 60% of Japanese respondents agree to the use of dual-pricing. Yuji Kuroiwa, governor of Kanagawa Prefecture, has come out against such measures, saying, “Foreign travelers are, from the perspective of Japan and its people, our guests.”
While I have not personally encountered this, I have seen online complaints of price disparities between Japanese and English-language menus. If true, dual-pricing would simply formalize a system already in practice, making it more clear for foreign residents. At Tamatebako, for example, the official price is higher, while anyone who can speak Japanese or provide proof of Japanese residence is given a discount.
As a Japanese resident myself, I support the idea of local discounts, but the proposed disparity at Himeji Castle (5x) is simply excessive. After all, the vast majority (about 75%) of foreign tourists visiting Japan are from neighboring nations in Asia, many of which do not have favorable exchange rates with the yen. Will only visitors from “wealthier” countries be expected to pay tourist prices? It’s not clear how strictly local discounts will be enforced, possibly leading to discrimination. It’s also possible that dual-pricing will further incentivize companies to prioritize high-paying tourists over local residents.
Off the Beaten Path
Prior to COVID-19, Japan was the 11th most-visited nation in the world, welcoming over 30 million tourists per year. Despite local frustration, Japan’s tourism chief, Ichiro Takahashi has announced a goal of doubling annual tourists to 60 million by the end of the decade, 2030. The plan relies on luring repeat visitors to rural areas across the nation.
Currently, about 40% of Japan’s annual foreign tourists are first-time visitors, while 60% are repeat visitors. While first-time visitors tend to visit popular sites in Tokyo and Kyoto, repeat visitors are more likely to look for experiences in new locations.
“There are still many little-known places in Japan that are left unexplored by tourists from overseas,” says Takahashi. Ideally, repeat visitors will spend more time outside major cities, reducing crowding while revitalizing rural communities.
While the total number of foreign visitors to Japan has surpassed record levels, tourists have not returned to all regions at the same rates prior to the pandemic. 20 prefectures have experienced a drop in tourists, while the proportion of visitors staying in Tokyo, Osaka/Kyoto, and Nagoya (Aichi), rose from 62.7% in 2019 to 72.1% in 2023.
Prefectures with Biggest Tourism Drop Post-COVID
One possible reason for this is the large price increase for the JR Pass enacted in October of 2023. The ticket allows foreign visitors unlimited travel on the Japan Rail system for various lengths of time, encouraging tourists to travel to remote locations.
While many tourists are looking for authentic experiences, obstacles include infrastructure, labor shortages, and awareness.
Fukui has long lagged as one of Japan’s least-visited prefectures, attracting 0.2% of total foreign visitors. The area has received new attention thanks to the recent Hokuriku Shinkansen (bullet train) extension. Fukui Prefecture took the opportunity to increase English-language guidance and support the building of new hotels. Now, Fukui Prefecture’s Katsuyama City — home to one of the world’s largest dinosaur museums — is Japan’s second-fastest growing destination, with a 24-fold increase year over year.
Action Items
What can be done to improve the experience of tourists and locals? In the short-term, the price of the JR Pass should be reduced. While it was grossly undervalued, I firmly believe it was a loss leader that enabled visitors to explore regions outside major cities. JNTO (Japan National Tourist Organization) should also publish countryside itineraries, highlighting specific routes, foods, and events.
JNTO should also partner with popular social media accounts and influencers to advertise lesser-known destinations. Options include ANA (All Nippon Airways), the girl group Atarashii Gakko, and the language-learning app Duolingo. JNTO should also feature and promote content by JET (Japan English Teaching) Program participants — foreign teachers working across the nation, like myself — to share their unique experiences.
National and local governments can also subsidize hospitality work in the countryside. This will help expand tourist services outside major cities, raise wages, and stem rural flight.
In the long-term, the national government should cooperate with manga and anime creators to promote countryside locations. Places featured in popular media have become pilgrimage sites for international fans, such as Kamakura’s Enoshima Electric Railway portrayed in Slam Dunk.
National and local governments should also reevaluate efforts in teaching English. Japan continues to be among the poorest-performing nations in Asia. I am not alone in arguing that the current English curriculum is too test-focused and memorization-obsessed, lacking conversation skills and spontaneity.
Greater English proficiency will make Japan more competitive generally. It will also make Japanese people more comfortable with the growing numbers of foreigners (both residents and tourists) and visitors will be more confident in exploring the countryside.
Conclusion
My favorite memories in Japan are from the countryside: enjoying an outdoor onsen (public bath) in Matsumoto, visiting museums at Naoshima in the Seto Inland Sea, fishing in Fukui. Most foreign visitors will simply never have these experiences unless they are informed and empowered to pursue them.
Author’s Note
As part of the Fukui Reporter program, I am tasked with participating in local events and publicly promoting the prefecture. This is a volunteer position that allows me free entrance to a selection of museums throughout the area. The opinions I share are my own.
