Tourism - Tourist arrivals are falling well short of their maximum limit due to visa and tour group restrictions

Tourism is unlikely to make a meaningful recovery until tour requirements are dropped

B2C firms should prepare for gradual improvements in tourist flows in Q4 2022 and develop plans to capitalize on the cancellation of Japan’s current package tours requirement, as the government is hinting at removing it soon. Firms should also assess the financial and operational abilities of their partners to meet greater demand levels from tourists as restrictions are loosened. Nearly one in 10 local hotels and travel agencies shut down for good due to the COVID-19 pandemic. Those that are still in business likely suffer from poor balance sheets, limited capital, and large debts. As a result, MNCs should expect partners in the industry to be highly price sensitive and have limited ability to invest in their operations and infrastructure. 


Earlier this month, the Japanese government raised the daily cap on foreign arrivals from 20,000 visitors to 50,000. The requirement for tourists to show a negative PCR test on arrival was also waived. However, Japan continues to enforce its most binding restriction, which is that tourists must travel on packaged tours and will not be granted visas unless that requirement is met.

Our View

Japan’s limited reopening of its borders to tourists has yielded little success so far. Despite a daily cap on foreign visitors of 20,000, the average number of daily visitors the country received in July was less than 5,000. Moreover, these figures do not only account for tourists, but students and business travelers as well. This is a far cry from the tourism boom that Japan experienced before the pandemic, where the country received nearly 90,000 visitors every day. The requirement to travel in tour groups—where strict mask mandates are enforced, and travelers have little ability to plan their own vacation—has deterred tourists from coming to Japan. As a result, raising the cap for daily foreign arrivals and scrapping the pre-departure test requirement will only have a limited impact on increasing tourist flows. In fact, removing the testing requirement will likely lead to a significant increase in tourist outflows, as Japanese residents will no longer fear a positive test result that could deny them re-entry.

However, B2C firms should expect good news soon. Japanese policymakers know that the recovery in tourism has been lackluster. Recent reports suggest that officials are likely to ease restrictions further in Q4 2022, as they look to increase tourist flows during fall and winter, which are usually periods of high tourism activity. If this happens, Japan will likely see a surge in tourist flows, and local economies will benefit from much-needed tourism revenues. B2C firms should closely monitor government communications on the subject and develop plans that can quickly be put into place to capitalize on greater tourist inflows.

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