[News Terms] As Korean Tourists Flock In... Surging Japan 'Inbound Consumption'

As the unprecedented weak yen phenomenon continues, the number of Korean tourists visiting Japan is increasing, leading to a surge in Japan's 'inbound consumption.'

Inbound originally refers to domestic travel by foreigners rather than locals, a term used in the travel industry. Various travel-related businesses targeting inbound demand are also called 'inbound business.' Conversely, 'outbound' refers to overseas travel by locals. As foreign tourists visiting Japan spend more at restaurants, hotels, duty-free shops, and other places, the Japanese government is using the term 'inbound consumption' separately to encourage the expansion of their spending.

[Image source=Yonhap News]

According to the Japan National Tourism Organization (JNTO), about 25.06 million tourists visited Japan last year, recovering to 80% of the pre-COVID-19 level in 2019. The travel expenditure of these tourists reached a record high of 5.2923 trillion yen (approximately 48 trillion won), a 9.9% increase compared to 2019, and the per capita spending also reached 212,000 yen (about 1.93 million won). In March last year, the Japanese government set a goal to raise foreign tourists' annual spending to 5 trillion yen and per capita spending to 200,000 yen by 2025, achieving both targets ahead of schedule. Although Japan's real Gross Domestic Product (GDP) growth rate in 2023 is 1.9%, Japanese media analysis suggests that about one-third of this increase was due to the effect of inbound tourism.

This expansion of inbound consumption is due to the ongoing weak yen phenomenon since last year. The yen exchange rate has recently fallen below 150 yen per dollar. According to the KOTRA Tokyo Trade Center, when converted to the annual average exchange rate, the total spending of tourists visiting Japan in 2023, when 1 dollar was equivalent to 140 yen, was 37.7 billion dollars, which did not reach the 44.1 billion dollars recorded in 2019 (1 dollar = 109 yen). Looking at the 'real effective exchange rate,' a representative indicator measuring the purchasing power of the Japanese yen, it is analyzed that the current purchasing power of the yen is almost similar to that of the early 1970s. This means that Japan's perceived prices are relatively cheap for foreign tourists.

JNTO recently announced that the number of foreign visitors to Japan in January this year was estimated at 2,688,100, similar to January 2019 before the COVID-19 pandemic. However, there are differences by country: Korean tourists were the highest at 857,000, a 10.0% increase compared to January 2019. Chinese tourists exceeded 400,000 for the first time since the pandemic, totaling 415,900, but this is still 44.9% less than in January 2019. Tourists from Taiwan, the United States, Australia, and other countries also surpassed pre-pandemic levels.