The Japanese yen’s fall against the U. S. dollar has raised some concerns in Japan, but may inspire more travelers to call at the country again, analysts say, though they say a significant rebound in the tourism sector may not do so. be carried out without the return of Chinese tourists.
After more than two years of strict Covid border controls, Japan on Tuesday reinstated visa waiver to 68 countries.
The packages are no longer needed, according to Japan’s National Tourism Organization (JNTO).
The restriction of access for another 50,000 people and the PCR control upon arrival at the airport were eliminated. However, it is still mandatory for travelers from all countries and regions to present a negative Covid control certificate or evidence of vaccination, JNTO said.
With the easing of restrictions and the depreciation of the yen, tourism in the country will return temporarily, especially from Asia, Jesper Koll, director of the Monex Group monetary company, told CNBC.
Koll said that while travelers from Europe and the U. S. are not yet in the U. S. While the U. S. is helping Japan’s tourism recovery, “most of the excitement and most of the travel” still comes from countries like Singapore, the Philippines and Thailand.
“The reasonable yen markedly increases the likelihood that tourism will make a big contribution to the economy,” Koll said. “As restrictions are lifted and inbound capacity opens, I expect we will see a very, very immediate acceleration in inbound spending. “and inbound tourism. “
In 2019, Japan welcomed 32 million foreign visitors and spent about five trillion yen, but inbound spending is now one-tenth of that amount, according to a September note from Goldman Sachs.
The investment bank estimated that incoming spending could reach 6. 6 trillion yen ($45. 2 billion) after a year of full reopening, as travelers will be encouraged to spend more due to the yen’s weakness.
“Our rough estimate indicates potentially higher domestic spending of 6. 6 billion yen (year-over-year) after full reopening to the pre-pandemic point of 5 billion yen, partly helped by the weak yen,” the note said.
The Japanese currency plunged to a new 24-year low and was at 146. 98 against the dollar’s trading schedule in London on Wednesday.
The Japanese government intervened in the foreign exchange market in September when the dollar-yen reached 145. 9.
“I don’t think the yen has been as reasonable as it is now in living memory,” Darren Tay, Japanese economist at Capital Economics, said Tuesday on CNBC’s “Squawk Box Asia. “”It was no longer easy for tourists to reopen the borders. . . . So I think the weakness of the yen will serve as an additional motivator” for them to return to Japan.
Although airfare costs to Japan have risen since the announcement, tourists will still get their money when they spend in Japan, Koll said.
“You can eat twice as many hamburgers, twice as much sushi for your dollar here in Japan, in the United States and even in the rest of Asia,” he added.
Customers for Japan’s tourism recovery look promising, but “the overall impact on the Japanese economy would not be positive,” as Chinese tourists have not yet returned, Tay said.
“Chinese tourists represent a giant portion of what foreign tourists spent in 2019. . . They are still following a zero-covid strategy, so they won’t be coming back anytime soon,” he said.
Goldman Sachs said Chinese tourists, who accounted for 30 percent of foreign visitors to Japan in 2019, could return until the current quarter of 2023.
Once China fully reopens, inbound spending through Chinese visitors may go from 1. 8 trillion yen in 2019 to 2. 6 trillion yen, or 0. 5% of Japan’s gross domestic product, said Yuriko Tanaka, an economist at Goldman Sachs.
“The Chinese hold the key to a genuine uptick in incoming spending,” Tanaka said.
Without Chinese visitors, it may be some time before inbound spending in Japan returns to pre-pandemic levels, Koll said. More than $3 trillion through March 2023.
While markets expect the U. S. Federal Reserve to be able to do so. With the U. S. government raising interest rates through 75 fundamental issues in November, the yen will continue to weaken as the dollar continues to strengthen, Koll said.
“You have the widening interest rate differential [between Japan and the U. S. “The U. S. ], and the Federal Reserve is already over. There is at least another interest rate hike on cards,” he said.
He added that the yen could weaken further towards the 155 level, strengthening only next spring, and this would be the result of action through Japan, but the fact that the Fed signals that it has “tightened the brake sufficiently”.
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