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Can the weak Yen lift tourist spending in Japan?

Starting October 11, Japan will open its doors to independent tourists for the first time since the outbreak of the Covid-19 pandemic. “Japan will relax border control measures to be on par with the US as well as resume visa-free travel and individual travel,” said Japan Prime Minister Fumio Kishida at a press conference in New York on Thursday.

In June, the Japanese government already partially opened the doors to allow visitors with authorised package tours and some other special regulations to enter the country. The daily arrivals of tourists were also capped at 50,000. While most economies in the region, excluding China, have reopened their borders to tourists, Japan’s tourism, as well as the economy, suffered as the country maintained the strictest border measures.

From October 11, short-term travellers to Japan will not have to apply for tourist visas and can travel individually, without going via a travel agency. However, foreign tourists will be required to be vaccinated thrice or submit a negative Covid-19 test result ahead of their trip, government sources said.

Before the pandemic, Japan allowed visa-free short-term travel for visitors from 68 countries and regions, including Singapore, Thailand, Malaysia, Hong Kong and the United States. Nearly 32 million people travelled to Japan in 2019, before the pandemic reduced the visitor flow to the country to a trickle.

Foreign tourist spending to boost economy

For some time now, business lobbies and travel companies have been urging the Japanese government to relax the border restrictions, as the strict measures did not match that of other countries in the region and are weighing on the economy. The move to open borders in October was therefore welcomed.

The weak Yen could now prove to be a boon for the economy, making Japan even more attractive to international tourists. Most recently, Japan’s currency faltered beyond 145 yen to the US dollar, making purchases and foreign travel to the country the cheapest in several decades.

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According to Goldman Sachs economists, spending by foreign tourists may increase by nearly a third from pre-pandemic levels after the travel restrictions are eased. A “ball-park estimation” shows the possibility of inbound spending rising by 32% to 6.6 tn yen ($46.4 bn) compared with 2019, a report by Goldman Sachs said.

However, the economists are also cautious since foreign visitors are likely to only return gradually. Especially tourists from China – the largest spending visitors in Japan before the pandemic – might take longer to return due to the country’s strict travelling measures, the report states.

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