The yen continues to weaken. Now that the COVID-19 turmoil has subsided, there are crowds of overseas tourists, not only in Japan’s city centers and tourist spots but practically everywhere. According to statistics, there were over three million overseas visitors to Japan in April, continuing the record-breaking trend seen in March. With the weak yen, these visitors enjoy enhanced purchasing power, making everything they buy in Japan feel like a bargain. Not long ago, I ate a bowl of ramen in the U.S. that set me back over $20. Even at 150 yen to the dollar, that’s 3,000 yen. Add a tip (about 20%) and you’re looking at 3,600 yen. In Japan, you’d pay less than a third of that.

With the devaluation of the yen, Japan seems like a very affordable country to tourists. Plus, it’s safe, clean, and the people are friendly, so more and more visitors are thinking, “There’s no better country in the world.” Of course, many of the people visiting Japan will be eager to visit again, and some among them may even consider working remotely and living here for a while.

Their current visits and future plans to stay longer boost consumption in our country. I don’t know the exact impact (it should be easy enough to look up), but for example, if there is a hotel in a tourist area that has 100 rooms and 50 are filled with people from overseas, only the remaining half needs to be filled by domestic tourists, which is a change from the past. It stands to reason that room occupancy rates will remain high, and it shouldn’t be hard in such a situation to raise room rates. In fact, at high-end sushi restaurants with only eight counter seats and a set price of 30,000 yen per guest, it’s often the case that more than half of the guests are from overseas. That works out to just under $200 for people exchanging U.S. dollars, which they probably won’t consider too expensive for a meal while traveling.

Economic booms in the tourism and restaurant industries lead to improved corporate performance and increases in employment and wages for the people who work there, which in turn boosts consumption. Although the influx of overseas tourists might create bottlenecks in infrastructure like flights, airports, and immigration control, this trend will likely only get stronger, not weaker (unless we face a pandemic or major earthquake).

Viewed from another angle, this trend likely means a dramatic increase in the number of people who get to know Japan, feel its charm, and come to love it. From this viewpoint, I think it will contribute to not just expanding consumption but also boosting investment. People mainly from China and other parts of Asia have been increasingly buying real estate in Japan, and this phenomenon is likely to expand further. For example, if you sell 100 condominiums in the city center, and 50 of them go to overseas buyers, you only need to sell 50 domestically. And this would permit more aggressive pricing strategies. First of all, real estate prices in Tokyo are not so high compared to major cities overseas.

Also on the topic of investments, there has been a surge in large-scale investments in semiconductor manufacturing in Japan. Whether it’s those made by Taiwan’s TSMC and Sony in Kumamoto, or Rapidus’s investments in Hokkaido, these are dynamic developments that haven’t been seen in the past 20 years, even with government support. Regarding the latter, Rapidus is planning production in Japan through a license agreement with U.S.-based IBM for their semiconductor manufacturing technology. Conversely, manufacturing in the U.S. would not be economically viable, so it makes sense to have a Japanese company, which has the necessary infrastructure and can produce at a lower cost, handle the manufacturing. (Although if I am right about that, it’s a bit disappointing.)

Japan is politically and economically stable, it has a well-developed legal system, and the business environment is favorable. It also has in place a wide range of other infrastructure. Further, with deflation persisting for over 20 years, prices of goods and services have not risen, making them more affordable than in other developed countries, and the weak yen has added to this. Consumption and investment from around the world are heading toward Japan, now seen as a bargain nation. This is a significant opportunity for our country, one that hasn’t come around for a long time. The current administration also seems to be aware of this and is taking action, but it has failed to effectively communicate this to the public. It’s really frustrating.

Hirotaka Shimizu
Chairman and CEO
Kamakura Shinsho, Ltd.