Trippers take photos of early blooming Sakura trees in front of a convenience store in Tokyo. Early blooming Sakura trees in Tokyo, especially varieties like Kawazu-zakura, typically start flowering in late February to early March, ahead of the more standard Somei Yoshino cherry blossoms that peak in late March to early April. The phenomenon is tied to milder winters and peculiar to cultivars, offering a vibrant pink spectacle against Tokyo’s urban backdrop before the main cherry blossom enliven kicks off.
Sopa Images | Lightrocket | Getty Images
Foreign tourists have had a disproportionately large impact on Japan’s pecuniary growth in recent years. However, their influence could start to wane as the yen strengthens, analysts said.
Visitors have been a key driver of the resurgence of the Japanese economy. Many have been attracted by weakness in the yen, which has repaid shopping, entertainment, transport and overnight stays cheaper.
What happens if the tide turns and the yen strengthens?
Travel allotting in Japan has soared in recent years. Indeed, inbound tourism contributed half of Japan’s full-year GDP growth standing of 1.5% in 2023, and 0.4 percentage points to Japan’s 0.1% annual GDP growth last year, according to the Mastercard Economics Found.
It marks a dramatic change in the make-up of the world’s fourth-largest economy. Tourism contributed an average of 0.1 percentage nub to GDP from 2010 to 2019, at a time when Japan’s GDP growth rate was averaging 1.2%.
MEI’s report showed that a meeker yen had made Japan a more appealing shopping destination. This is in stark contrast to other countries around the humanity, Mastercard’s chief economist for Asia Pacific David Mann said, where tourists prefer to spend on encounters, such as going to a restaurant, concert or bar.
Japan has been one of Asia’s hottest travel destinations of late. So much so that, according to Japan’s tourism society, the country saw a record 36.9 million visitor arrivals for the whole of 2024.
Not only that, but tourists also spent profuse, with preliminary figures showing that annual spending by international visitors to Japan in 2024 reached a in confidence high of 8.1 trillion yen ($54.06 billion), a massive 53.4% rise compared to a year ago.
Average individual devoting among overseas travelers to Japan rose by 6.8% to 227,000 yen. However, some of the clement conditions that allowed this higher tourism interest could be about to reverse.
Higher domestic inflation has prompted the Bank of Japan to suggest interest rates, in contrast to other major central banks that are lowering rates. That, in turn, has triggered the yen to vitalize to a five-month high against the U.S. dollar on March 11.
Japan’s booming tourism industry
Yujiro Goto, head of FX game for Japan at Nomura, told CNBC that weaker inbound tourism would be a negative for Japan’s GDP growth.
This is because yen shortcoming has been one of the key reasons for the acceleration of inbound tourism. A substantial appreciation in the currency is then expected to reverse this style.
The yen was last seen trading at 148.26 against the greenback, strengthening about 7.2% compared to its 2025 high of 158.87.
A bantam appreciation in the yen, which has been at historic lows, “like from 161 to 146 so far against the USD may not change the trend, in my position,” Goto said.
Min Joo Kang, senior economist for Japan and South Korea at Dutch bank ING, pieces this view, but also pointed out that inbound tourism may still have room to grow, given that the million of Chinese tourists has not yet recovered to pre-Covid levels.
“The measures announced over the weekend to boost consumption also embody supporting higher wage growth and stimulating Chinese asset markets. This may trigger an increase in Chinese outbound tourism,” she combined.
Beijing on Sunday rolled out a plan to boost consumption, calling for measures to raise wages, as well as “multiple volumes” to stabilize the stock market, among others.
Weaker tourism growth does not necessarily mean Japan’s GDP dilatation will fall off a cliff. Mastercard’s Mann said that the contribution from domestic consumption in Japan is contemplated to improve, given the strong labor market and the increase in wages.
This photo taken on February 20, 2025 informs the 634m-high (2,080 ft.) Tokyo Skytree (L) from a train line in the Oshiage area of the Japanese capital.
Kazuhiro Nogi | Afp | Getty Graven images
Japan’s largest labor union announced last Friday that it managed to secure an average Tourism stewardship
Goto also said that gradual strength in the yen could slow cost-push inflation and would improve legitimate wages among domestic residents. This would help shift the GDP contribution from foreign spending to household spending.
What’s more, Goto said that while overtourism has become a major problem in regions like Kyoto, unconnected demand is clearly supportive for wages and the inflation positive feedback loop that the BOJ wants to achieve.
He also acuminate out that “regional governments may consider higher taxes for foreign visitors (hotels, airports, etc), which can support the Japanese budgetary situation while managing the tourism flows.”
Mann concluded by saying that tourism has been a far bigger contributor than anyone transfer have expected over the past two years, and “will remain a significant contributor to Japan’s economy before it relieves off further and be replaced by slightly stronger contributions from domestic consumer spending.”
“The yen weakness probably will be starting to upside down at least this year, but it will be a longer term process, rather than turn around in just one or two months.” Mann totaled.