What Japan’s newly-opened border means for its struggling retailers


It’s been a long time coming for Japan, which finally reopened its borders to independent foreign travellers on 11 October, after relaxing Covid-19 restrictions for residents earlier this year. The daily limit of 50,000 arrivals is a thing of the past. Tourists will still need to prove that they have at least three vaccination shots or provide a negative coronavirus test result within 72 hours of departure to enter the country.  But despite these caveats, senior executives from Japan Airl

n Airlines and All Nippon Airways told FlightGlobal that there was a spike in future bookings immediately after the reopening was announced.

Executive vice president at JAL, Shimizu Shinichiro, told the publication that forward bookings increased three-fold in the week following the announcement. Meanwhile, at ANA, forward bookings for flights to Japan spiked five times week-on-week and remained strong.

This has led the two airlines to adjust their international capacity projections to about 60 per cent by the end of March 2023. 

The executives acknowledge that a weaker yen is good for inbound travellers, and the slew of businesses that rely on tourism dollars, but not attractive for outbound travellers.

Encouraging signs

According to ABC News, Fitch Ratings forecasts that Japan’s economy will grow at a 1.7% annual pace this year and by 1.3% in 2023, supported by easy credit, a recovery for service industries and a gradual fix for supply-chain problems, which will boost manufacturing and exports.

As reported by Euronews, just over half a million visitors have come to Japan so far in 2022, compared with a record 31.8 million in 2019. Prime Minister Fumio Kishida hopes to attract 34.5 billion euros in annual tourist spending.

Spending from overseas visitors will reach only 2.1 trillion yen (€14.9b) by 2023 and won’t exceed pre-COVID levels until 2025, wrote Nomura Research Institute economist Takahide Kiuchi in a report.

It has been stated that Narita Airport, Japan’s biggest international airport some 70 kilometres from Tokyo, remains quiet, with almost half of its 260 shops and restaurants closed.

It has also been reported that discount store chain Don Quijote would be hiring more multilingual foreign staff to prepare for a rise in duty free shopping services. Apparently, the chain has already installed translation services in 14 languages to assist foreign shoppers.

The publication also noted that Expedia Group reported that searches for flights to Japan on its website almost doubled in September, while hotel searches increased by 85 per cent.

Nonetheless, Chinese travellers who used to account for 30 per cent of tourist arrivals in Japan in 2019, are only contributing 1.8 per cent this year. This can be attributed to China’s strict zero-Covid policy, so a rebound is unlikely to happen anytime soon.

A shrinking economy

According to NikkeiAsia, the Japanese economy shrank for the first time in four quarters in the period between July and September, as inflation and a weak yen hit the country, which also saw a big Covid-19 wave during this time.

The publication stated that based on preliminary data released by the Cabinet Office, Japan’s seasonally adjusted real gross domestic product shrank 0.3 per cent from the previous quarter, which loosely translated to an annualised decline of 1.2 per cent.

Private consumption grew only by 0.3 per cent in the third quarter, and this is a major element of the local economy. 

This was in stark contrast to the previous quarter’s 1.2 per cent growth. Essentially, these numbers displayed dampened consumption and higher inflation during the nation’s Covid-19 wave as well.

Higher energy costs and a weaker yen combined to drag the overall GDP numbers lower as imports grew by 5.2 per cent, which led to a decline in net exports too.

In a related development, the hotel industry in Japan is also concerned that the country’s labour shortage may become an issue as the reopening will demand more workers.

The Japan Hotel Association has been quoted as saying that since workers left the industry due to diminishing prospects during the pandemic, there is a need to make this jobs attractive again (i.e. better wages), or it could turn into a long, hard winter.

Increased household spending

It’s not all doom and gloom, as Japanese households increased their spending in September from a year earlier, which marked a four-month growth streak, as shoppers enjoyed their first summer without restrictive Covid-19 inspired movement control orders.

According to Reuters, the uptick in consumption is facing inflationary pressures that are exacerbated by the weak yen. Worryingly, real wages in the country declined in September for a sixth straight month. The publication believes that this will temper growth prospects.

Economists predicted household spending to rise to 2.7 per cent by a median estimate of theirs, but it only rose to 2.3 per cent, according to government data. 

Nonetheless, private consumption, which makes up more than 50 per cent of the economy, has benefited from the opening up of the economy.

Consumer inflation rose 3.4 per cent in October, its fastest annual pace since 1989, according to statistics from the Bank Of Japan, and this will affect the price of food and energy items.

Unprecedented times

The Japanese yen is currently at a 32-year low against the US dollar, and the economy minister, Shigeyuki Goto, explained that the risks of a global recession due to monetary tightening by Western countries could be a hammer blow to households and businesses.

According to Reuters, the Japanese government is increasing its efforts to shore up households with measures to reduce the effects of inflation. A US$196 billion fund in extra spending in the budget was tabled recently to accelerate this effort.

Interestingly, it was reported that the tumbling Yen has sparked a growing secondhand market in the smartphone category. According to MarketScreener, industry watchers believe Japanese shoppers are becoming more open to buying secondhand products.

Daisuke Inoue, who is the chief of second-hand store Belong, was quoted as saying that average sales in his stores have tripled once Apple raised its prices on its products. 

He feels that the market for second hand smartphones can grow by four or five times from its present 5 per cent penetration rate in Japan.

The publication stated that sales of used smartphones grew nearly 15 per cent in Japan to record 2.1 million in the last financial year, and is forecasted to reach 3.4 million by 2026.


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