Perhaps you know of someone who vacationed in Japan recently. That’s not surprising considering that Japan is having somewhat of “a moment.”
In 2023, Japan hosted 25 million tourists, which is about 80% of the pre-Covid levels (32 million in 2019), with significantly fewer visitors from China but more from other countries.
A major contributor to the tourism rebound is the Japanese yen, recently at around 150 per $1. You would have to go back 40+ years to catch the yen at lower levels: In April 1990, the yen traded around 159.8 against the dollar and last breached 160 in December 1986.
The Japanese yen is the 3rd most-traded currency in the world, after the U.S. dollar and the euro. The differential in interest rates between the U.S. and Japan is causing more demand for dollar-denominated debt, meaning more people exchanging yen for dollars. Currently the 10-year Treasury bond yields around 4.2% while 10-year Japanese government debt yields only 0.74%.
Prior to 2012, Japan had relatively few foreign visitors (6 to 8 million annually). But in the 2010s, the country started to promote tourism more aggressively, leading to a tripling in visitors between 2013 to 2018 to a then record 31 million, an average annual growth rate of 25%.
It certainly helps that Japan is considered to have some of the best-run airlines in the world and some of the world’s top airports. In the 2023 World Airport Survey, both the Haneda and Narita airports in Tokyo were ranked among the world’s top 10.
When the yen will start gaining strength is anyone’s guess. But 2024 could be another good year to visit Japan.
