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The weak yen is attracting millions of tourists to Japan.

Considered until now a destination within reach of few, Japan is attracting a record number of foreign tourists who, encouraged by the weakness of the yen against the dollar or the euro, do not hesitate to spend their money on kimonos, knives, or luxury dinners.

Japan is attracting a record number of foreign tourists who, encouraged by the weakness of the yen against the dollar or the euro, do not hesitate to spend their money on kimonos, knives, or luxury dinners. The depreciation of the yen, which fell on Monday to decades-low levels against the dollar and the euro, boosts tourist consumption much to the delight of local merchants.

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In March, Japan received more than 3 million foreign tourists in a single month for the first time. This represents an 11.6% increase compared to March 2019, before Covid-19 hit the tourism industry.

Furthermore, the per capita spending of these visitors increased by 52% in the first three months of the year compared to 2019.

USD/JPY

This phenomenon can hardly be explained without the exchange rate variation: in 2019, one dollar bought 112 yen. On Wednesday, it was nearly 158 yen, the cheapest price in 34 years.

A bowl of ramen noodles costs around 1,000 yen, or $6.3. In 2019, it was $8.9.

A luxury watch or a branded wallet priced at 700,000 yen is now $4,430, far from the $6,250 it was five years ago.

Many stores exempt tourists from the 10% sales tax if they show their passport.

The depreciation of the yen is partly attributed to the Bank of Japan’s policy of maintaining ultra-low interest rates, contrary to other central banks that are increasing them.

While favorable for tourists, this phenomenon penalizes domestic consumption, which has been declining since March 2023 due to inflation. The low yen raises the cost of imports and diminishes purchasing power.

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ABOUT THE AUTHOR See More
Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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