Japan is seeing a record number of foreign tourists, whose consumption is boosted by the current weakness of the yen, which fell to record lows against the dollar and the euro on Monday. “I bought three pairs of shoes, which I absolutely never do. It was really worth it because of the exchange rate,” rejoices Katia Lelièvre, a 36-year-old French tourist interviewed in the tourist district of Asakusa, in Tokyo.
“I came five or six years ago and I remember that prices were significantly higher than today, especially for cosmetics and clothes,” says an Italian tourist. She says she spent a lot of money sampling Japanese cuisine, which is also “very cheap.” “The weakness of the yen plays a role” clearly in the volume of spending by tourists, thinks Saori Iida, saleswoman in a second-hand kimono store. “A lot of people do the calculation and when they see the equivalent in their country’s currency they say: oh hey, I’ll take that too,” she notes.
The Japanese archipelago welcomed some 3.1 million foreign visitors in March according to the Japanese National Tourism Office, an absolute record in one month, notably attributed to the cherry blossom season and the advantageous exchange rate.
And average spending per person by foreign tourists increased between January and March by 52% compared to the same period in 2019, the pre-pandemic reference year. A bowl of ramen noodles for 1,000 yen then cost 8 euros, compared to 5.8 euros at the start of the week. And a luxury watch which cost the equivalent of 5,600 euros in 2019 is “no longer” worth more than around 4,000 euros, tourists can also benefit from a tax refund by presenting their passport. According to statistics from the Japan Tourism Agency, Australian holidaymakers are the biggest spenders, followed by the British and the Spanish.
If the situation is to the delight of traders, it is however weighing on the consumption of Japanese households, in constant decline since March 2023, while the Japanese see their purchasing power weakened by inflation and the weakness of the yen, linked to discrepancy between Japan’s accommodative monetary policy and those observed in the United States or Europe. Japanese media have also recently been surprised by the opening of new restaurants with prices resolutely aimed at tourists, prohibitive for a Japanese salary in yen.
Even beyond currency effects, “for many tourists, Japanese products and services in Japan may seem inexpensive, especially for the quality they can receive” in exchange, said Akiko Kohsaka, an economist at Japan Research Institute. But the cheap yen “can be a factor in encouraging spending”, helping “to loosen people’s purses. For example, tourists may choose to stay in better hotels than expected, stay in Japan for an extra day or buy branded items,” adds Kohsaka. “I think Japan can have confidence in itself as a tourist destination,” emphasizes Ms. Kohsaka. “Even if the yen reverses its trend, I don’t believe it will lead to a sharp drop in tourist spending,” she said.
