The number of South Koreans visiting Japan dropped 7.6% in July, underscoring the toll a trade spat is taking on commerce in both countries.
The decline in South Korean tourists dented an otherwise positive result, with total number of visitors to Japan climbing 5.6% from a year earlier, according to Japan National Tourism Organisation. The result was boosted by an almost 20% jump in visitors from China, which accounts for the biggest portion of Japan’s tourists.
The tourism agency pointed to a sluggish South Korean economy and state of ties between two nations as reasons for decline in travelers from that country. More South Koreans have been traveling to China and Vietnam, the government agency said in a release on Wednesday.
The pullback could be a bad sign for Japanese firms. Although government policy has only had an impact on a few niche areas, the trade dispute sparked a public backlash in South Korea, with consumers boycotting Japanese products.
from Uniqlo clothes and canceling travel plans to their neighbour across the sea. South Korea is the second-biggest source of visitors to Japan, and their absence could impact spending on lodging, domestic transit, food and shopping for souvenirs, beauty products and clothing.
“We’re seeing an impact” from Korea, said Takeshi Nishii, the incoming co-chief operating officer of Pan Pacific International Holdings Co., which runs Don Quijote discount stores. “In Fukuoka, Kansai, around here — there’s the chance there could be a pronounced impact.”
He added that Don Quijote is seeing strong business from visitors from other countries; about 10% of the chain’s sales are tax-free purchases.
While the hit to Japan’s economy from the months-old trade dispute is uncertain at this point, the spat adds another challenge for consumer-facing companies caught in the larger trade battle between the U.S. and China, as well as the fallout from Hong Kong’s political protests. Japanese companies often bank on their “Made in Japan” quality to appeal to consumers for overseas sales, which are a key contributor to business growth.
Many Japanese beauty companies and retailers also net a portion of domestic revenue from duty-free sales — a rough gauge of tourist purchases. Those include department stores and makeup brands including Shiseido Co. Despite the fall in Korean travelers, tourists from the country likely make up a small portion of inbound visitor sales at Japanese beauty companies, so “do not expect a major impact from deterioration in Japan-Korea ties,” Jefferies Group LLC analyst Mitsuko Miyasako wrote in a note to investors Wednesday.
In 2018, Korean tourists in Japan spent about 584 billion yen ($5.5 billion), with most of it going toward lodging and shopping, according to the Japan Tourism Agency.
The travel boycott has been notable this summer, with airlines reducing flights as South Koreans cancel their trips. The number of new reservations for tours into Japan dropped 30% and 70% in July and August, respectively, compared with a year earlier, according to Hana Tour Service Inc., a major Korean tour agency. Another, Modetour Network Inc., said there’s effectively been no new reservations for Japan in August.
The trend is likely to continue. Korean Air Lines said it will reduce some flights to Japan beginning next month because of weak demand. Japan’s loss could be a benefit for other Asian countries, as the carrier said it would increase flights to destinations including Bali, Vietnam, Australia and China.