By Yuki Yamaguchi,
Japan's long-awaited lifting of border restrictions may not lead to a quick recovery to pre-pandemic levels for the nation's airlines, as the current weakness of the yen is expected not just to boost inbound tourism but also suppress demand for outbound trips while higher fuel costs will keep airfares high.
Japan on Tuesday removed its cap on daily arrivals, most recently set at 50,000, and resumed visa-free individual trips to the country, discontinuing most of what had been criticized as overly strict COVID-19 border control measures.
That is expected to lead to a surge in inbound tourism, helping Japan's airlines to recover after they battled to survive through a sharp cut in flight services and staff furloughs to trim costs during the coronavirus pandemic.
The country ranked top on a list of destinations in a 2021 travel and tourism development report by the World Economic Forum, and the yen's slide to its lowest level against the dollar in 24 years is likely to make Japan even more enticing to foreign tourists.
"Through these measures, we hope to promote tourists' travel both domestically and internationally and help revive demand hit by the pandemic and revitalize regional areas," Chief Cabinet Secretary Hirokazu Matsuno told reporters Tuesday.
Prime Minister Fumio Kishida said last week the government aims to achieve over 5 trillion yen ($34 billion) in annual tourist spending by reviving inbound tourism.
Donald Crites, who visited the southern city of Kitakyushu on a business trip in September, told Kyodo News at Tokyo's Haneda airport that he did not get a chance to see other parts of Japan before heading back to Canada but hopes to come back for sightseeing, saying that "there's a lot to see" in the country.
Japan Airlines Co., one of Japan's two biggest carriers, said reservations for inbound flights have more than tripled since the government outlined its plans to scrap the daily entry limit, with robust demand from Southeast Asia, Taiwan and Hong Kong in particular.
The entry cap were first introduced in March 2021 with the arrivals cap set as low as 2,000 before being raised in stages. Japan has been slower easing restrictions than other countries.
The number of foreign visitors to Japan in 2021 fell 94.0 percent from the previous year to a record low of 245,900, a sharp drop from a record high of 31.88 million in 2019.
JAL's domestic rival All Nippon Airways Co. said it is preparing to ramp up international flights from late October.
"We are expecting a surge in the number of customers. It's important that we welcome them properly according to the change in demand," ANA President Shinichi Inoue told reporters.
Still, Japan's airline sector may not be set for a quick recovery, analysts say.
The weakness of the yen is threatening to cut deeper into demand for overseas trips from Japan, as some economists say the currency could test the downside to around 147.50 yen or the weakest level in 32 years against the dollar.
"It's hard to deny that a weaker yen is cooling outbound travel demand," said Kenji Kanai, senior analyst at Tokai Tokyo Research Institute. "Given the yen could further depreciate and wages have not increased yet (significantly), it's difficult for outbound tourism to gain momentum at this point."
A weaker yen raises costs abroad for travelers from Japan and imported fuel costs for Japanese airlines. The price pressure is even higher with global inflation poised to dampen travelers' shopping appetite, analysts say.
"In the face of rising prices of goods, ordinary people simply can't afford to go traveling abroad right now," Saisuke Sakai, senior economist at Mizuho Research & Technologies said.
The cost of airline tickets remains high due to a surge in fuel surcharges after Russia's invasion of Ukraine sparked a sharp rise in oil prices. Surcharges at JAL and ANA have risen to record highs.
The average fuel surcharge, for example, roughly quadrupled for flights between Tokyo and Hawaii compared with pre-pandemic times, according to a major travel agency in Tokyo.
If virtual meetings -- a change in business practices stemming from coronavirus-related restrictions -- remain common, demand for business trips might not fully recover.
In addition, the airline industry is likely to find it difficult to expand operations immediately to meet a surge in travel demand after conducting large-scale job cuts in response to a sharp demand drop during the pandemic, JAL said.
"It will take until around 2025 for demand for international flights to fully recover to the pre-pandemic level," JAL President Yuji Akasaka told reporters.
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