TOKYO, Japan – The Land of the Rising Sun is shining brighter than ever for international travelers. Japan has broken its all-time record for foreign visitor arrivals, welcoming a staggering 3.1 million tourists in March alone.
This unprecedented tourism wave comes on the heels of Japan fully reopening its borders last October after over two years of strict pandemic-related entry restrictions. With that long-awaited reopening unleashing pent-up global demand, an unexpected catalyst has turbocharged the tourist influx – the yen’s sharp depreciation against major foreign currencies.
The Japanese yen has plunged nearly 10% versus the U.S. dollar so far this year, accelerating a downward trend that has made travel to the island nation dramatically cheaper for many international visitors. With hotel stays, restaurant meals, transportation, and shopping excursions all growing more affordable, tourists are flocking to experience Japan’s unique culture, cuisine, and attractions like never before.
“The weak yen is providing an extra incentive for foreigners to visit Japan right now,” said Mika Tokairin, an economist at Mizuho Securities in Tokyo. “It enhances the overall travel experience by making everything from the hotel stay to souvenirs much more cost-effective.”
A Currency Boost for the Tourism Industry
Just how much of a difference does the yen’s decline make? Consider that a $100 USD bank transfer to Japan would have fetched around 11,800 yen at the start of 2022. But thanks to the currency’s depreciation, that same $100 can now buy over 13,600 yen – a difference of 15%.
Put another way, a traveler converting $1,000 USD to yen last year would have gotten the equivalent of around $1,150 in spending power today, simply due to the currency fluctuations.
For budget-conscious tourists exploring pricey cities like Tokyo, that extra spending power means the difference between staying in a modest business hotel or splurging on a high-end ryokan with an outdoor onsen hot spring bath. It could fund a multi-course kaiseki dining experience at a Michelin-starred restaurant instead of casual ramen meals. And with a bit leftover, visitors can load up on high-quality Japanese omiyage (souvenirs) before flying home.
“I was surprised by how far my dollar traveled in Japan,” said Jane Martinson, an American tourist from Seattle visiting Tokyo for her honeymoon. “The hotel was very upscale and we stayed longer than we initially planned since meals and other activities were quite reasonable with the exchange rate.”
Japan’s Tourist Target Will Be Smashed
Japan had set an ambitious target of welcoming 32 million foreign visitors annually by 2025. But after hosting a record 8.6 million international arrivals in just the first quarter of 2024, the country is now expected to totally shatter that goal this year.
The Japan National Tourism Organization (JNTO) credited the unexpected currency boost, along with resurgent global travel demand post-Covid, for the torrid tourism pace. The JNTO said the weak yen alone will likely drive $30 billion in tourist spending across the country this year.
“The travel experience has become relatively much more affordable for visitors from countries like the United States, Australia, Canada – really anywhere with a traditionally strong currency against the yen,” explained JNTO spokesperson Hiroko Kimura. “Word has clearly spread because we’re seeing numbers rebound even faster than our most optimistic forecasts.”
The surge has stretched Japan’s hospitality industry, with many popular hotels and ryokans fully booked months in advance. Select tourist attractions like Tokyo’s iconic Tsukiji fish market have grappled with overcrowding. But overall, the dramatic uptick in visitors has provided a huge economic boost.
Luxury Retailers Cash In
Japan’s luxury retail sector has emerged as one of the biggest winners of the tourism frenzy and yen slump. For foreign visitors, the combination of brand-name exclusivity and favorable exchange rates has turned many high-end shopping meccas into unbeatable bargains.
Global luxury giants like Louis Vuitton, Chanel, Hermès and Cartier have all reported double-digit sales spikes at their Japanese outlets over the past six months. Upscale department stores like Isetan and Mitsukoshi have seen so much tourist traffic, some locations have extended operating hours to accommodate it.
“Duty-free luxury shopping in Tokyo and other major cities is an absolute steal right now,” said Margaret Brill, a tourist from Sydney. “I got a Celine handbag and some accessories for what would’ve been a shocking splurge back home, but here it didn’t sting nearly as much thanks to the exchange rate savings.”
Japan has long been a shopping paradise for luxury brands thanks to its affluent consumer market and absence of sales tax on exported goods. And the dramatic yen slide has only amplified that appeal, attracting big-spending travelers who might otherwise have purchased luxury items nearer to home.
Hidetoshi Kamada, an economist at SMBC Nikko Securities, estimated around a third of Japan’s luxury sales now come directly from foreign tourists taking advantage of the favorable exchange rates. The prestigious Ginza district in Tokyo has been a particular hotspot.
“The depreciating yen has effectively put the luxury goods sold at places like Ginza on a year-round sale for tourists,” said Kamada. “It’s very hard to pass up that kind of perceived bargain when splurging on high-end handbags, watches, or accessories.”
Whispers of an Intervention
The yen’s plunge, however, has not been met with universal praise across Japan. While a boon for tourism and sales of Japanese exports, the currency’s weakness has contributed to soaring import costs that are elevating inflation and squeezing household budgets.
This dynamic has fueled speculation that Japanese policymakers, who have traditionally favored a strong currency, may attempt to prop up the yen through direct market intervention. Some actions, like last month’s surprise interest rate hike by the Bank of Japan, have aimed to bolster the yen’s attractiveness.
But so far, demand for travel and tourism in Japan has shown remarkable resilience in the face of rising costs. Still, authorities may eventually grow uncomfortable with the depth of the yen’s depreciation if inflation accelerates and the cost-of-living crisis worsens for citizens.
For the time being, however, Japan remains firmly established as a global travel hotspot – made all the more alluring to foreign visitors by the yen’s bargain basement exchange rates. As long as those favorable currency dynamics hold, Tokyo’s abundant sights, sounds, and shopping boulevards will remain jam-packed with tourists hunting for their next great deal.
