Japan’s hopes of economic revival from big-spending China tourists fade as they seek fun not bargains
Chinese holidaymakers’ shopping sprees in Japan are on course to fade out despite growing visitor numbers, casting a shadow over an economy that is increasingly counting on tourist spending amid the floundering stimulus programme envisaged by Prime Minister Shinzo Abe.
A strengthening yen, together with travellers’ shift from “shopping for bargains” to “having fun”, are fuelling concerns retailers may no longer pull in as much money as before from wealthy Chinese who account for nearly half of total foreign visitor spending in the world’s third largest economy.
That warning comes after the release of official figures showing that average spending per foreign visitor in the third quarter slipped 17.1 per cent to 155,133 yen, dragged down by an 18.9 per cent slump in Chinese visitors.
It has posed fresh threats to a tourism boom that proved a rare sweet spot in reviving Japan’s fragile economy, and heightened uncertainty whether Tokyo will fulfil its goal to more than double tourism spending by 2020 to 8 trillion yen.
The tumble came despite a record number of Chinese tourists in the first nine months of the year, rising to five million from 4.99 million a year earlier and making Japan the third most popular overseas travel destination after South Korea and Taiwan for mainlanders.
Last year, China’s consumers flooded stores snapping up facial masks and toiletries, handbags and jewellery. Their activities led to the creation of a new Japanese buzzword – “Bakugai” – which translates as “explosive buying by Chinese tourists”.
However, the yen’s prolonged strength – it has appreciated 13.45 per cent against the US dollar so far this year – discouraged “bulk buying” of pricey items among Chinese tourists, who are now “cherry picking” their purchases.
Yamamoto Ryoichi, president of J. Front Retailing, the operator of the Daimaru department store chain, told investors in October that sales per inbound tourist “would continue falling” for the second half of this financial year, blaming it on the strong yen.
“The exchange rate is a critical factor dragging down foreign tourist spending,” the Japan Tourism Agency said in a statement, adding Chinese travellers were also buying less because of a tougher tariff regime.
Beijing’s tightening grip on overseas buying, intended to crack down on smugglers and aid domestic manufacturers, resulted in many international travellers at Chinese airports receiving higher taxes on new Hermes bags and Bulgari watches found in suitcases.
Agency data showed that Chinese tourists this year are also increasingly choosing cosmetics and food over home appliances such as rice cookers and hi-tech toilet seats.
Isetan Mitsukoshi Holdings, another leading department store operator in Japan, slashed its operating income forecast for the fiscal year 2016 by more than a half last week, citing dwindling duty-free sales particularly in jewellery and watches. Its shares have tumbled 44.7 per cent so far this year.
Binge shopping has become less of a priority for Chinese tourists, many of whom are turning to food and leisure. Events in in Japan are finding parallels within Hong Kong, which has suffered from a lingering retail and tourism downturn because apart from shopping, there is little else to do.
Lu Yuqun, a 25-year-old Shanghai native, is just back from a her third trip to Japan, where she spent most of her holiday eating sushi and sashimi around Tokyo and Kyoto and enjoying hot springs in Kanagawa, just south of the capital.
“My boyfriend and I only brought home some Japanese snacks, as we would have more money to stay at hot spring hotels,”the project administrator said.
She is among a growing number of affluent Chinese holidaymakers seeking an experience while travelling rather than spending on flashy handbags and gold watches.
A recent survey by HSBC showed that young, wealthy Chinese – tipped as the most crucial generation of Chinese consumers – are turning their backs on traditional shopping in favour of spending their money on entertainment, travel and healthy living.
“Shopping is not the only focus in terms of consumer spending. We believe that travel, both in and out of China, is a key trend that is in its infancy,” said Erwan Rambourg, HSBC’s global co-head of consumer and retail.
The poll of more than 2,000 affluent millennials found that nature and food were two top attractions of a holiday destination, and the wealthier they were, the more likely they were to be drawn to regions farther away such as Europe or the US.