Japan BRIEF - The impact of the lifting of restrictions on FITs Oct 2022

Inbound tourist demand set to recover after lifting of foreign individual travel restrictions

Creating Resilience

BRIEF | Creating Resilience

Inbound tourist demand set to recover after lifting of foreign individual travel restrictions

By Yoshitaka Igarashi, Kaoru Kurisu

SUMMARY

FIT ratio (2019)

• Japan is set to significantly loosen border restrictions from October 11th, 2022.

76.6%

• The most important change will involve permitting the entry of foreign individual travellers, who comprised more than three-quarters of all overseas visitors to Japan prior to the pandemic.

• The loosening of the restrictions is set to act as a catalyst for the recovery of inbound tourist demand.

• With the hotel and retail sectors having been slow to recover from the impact of pandemic-related measures, the lifting of border restrictions combined with the benefits of the weak yen is set to lead to an increase in demand, particularly in the higher end segments.

FIGURE 1: Loosening of border restrictions From Jun. 2022

From Sep. 7th, 2022

From Oct. 11th, 2022

Foreign entrant limit

20,000 per day

50,000 per day

No limit

Pre-departure test requirements

Submission of negative test result (within 72 hours before departure)

Exemption for vaccinated travellers (three doses)

Exemption for vaccinated travellers (three doses)

Package tours

Only guided tours allowed

Non-guided tours also allowed

Non-guided tours also allowed

FIT (Foreign Individual Travel)

Not allowed

Not allowed

Allowed

Visa

Required

Required

Visa exemption for short-term visits

Source: Ministry of Foreign Affairs of Japan, CBRE, September 2022

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Inbound tourist demand set to recover after lifting of foreign individual travel restrictions

Creating Resilience

Loosening of border restrictions from October 11th

1.

From October 11th, 2022, border restrictions for entry to Japan, implemented to prevent the spread of COVID-19, are set to be significantly loosened (FIGURE 1).

Starting from this date, the limit of 50,000 overseas entrants per day will be abolished. In conjunction with the long-term weakening of the yen, expectations are high that the lifting of these restrictions will serve as a catalyst to reinvigorate inbound tourist demand.

A comparison of the entry limits and the actual numbers of foreign nationals entering Japan, however, reveals that as of August, the number of entrants still lagged far below the maximum allowed levels (FIGURE 2). For this reason, some market observers remain sceptical that the abolition of these limits will be effective.

FIGURE 2: Daily foreign visitor numbers and foreign entrant limits Maximum limit on the number of entrants

Foreign Visitors per day

Jan

3,500 Feb

5,000 7,500

Mar Apr

10,000

May Jun

20,000

Jul Aug

50,000

Sep 2022 0

10,000

20,000

30,000

40,000

50,000 person per day

Source: JNTO, Japan Tourism Agency, CBRE, September 2022

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Creating Resilience

Inbound tourist demand set to recover after lifting of foreign individual travel restrictions

FIT ratio (2019)

2. The major impact of the lifting of restrictions on foreign individual travellers

76.6%

The most significant aspect of the latest round of border measure changes is permitting the entry of Foreign Individual Travellers (FITs). In 2019, prior to the onset of the pandemic, FITs comprised 76.6% of all foreign visitors to Japan (FIGURE 3). This means that until October 11th, Japan’s borders have only been open to just over 20% of all potential foreign tourists. When viewed in this context, the fact that visitor numbers are well below the daily limit is no surprise.

Prior to the pandemic, 86% of foreign visitors to Japan were from Asia Pacific.

In comparison to Europe, a greater number of countries in this region continue to impose strict border controls. For this reason, the planned lifting of border restrictions is unlikely to result in the immediate return of visitor numbers to pre-pandemic levels. With the FIT ratio of in excess of 60% for all countries and regions (FIGURE 4), however, the volume of latent demand unlocked by the lifting of FIT restrictions is extremely significant.

FIGURE 3: FIT ratio (2019)

FIGURE 4: Top 20 countries and regions in terms of visitor arrival numbers, with FITs ratios (2019) thousand people

76.6%

Visitor Arrivals

Share of FIT (RHS)

10,000

100%

8,000

80%

6,000

60%

4,000

40%

2,000

20%

0 Share of Travel Arrangements; Individually arranged

Source: Japan Tourism Agency "Consumption Trend Survey for Foreigners Visiting Japan 2019 Fixed Value", CBRE, March 2020

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China South Korea Taiwan Hong Kong, SAR United States Thailand Australia Phillippines Malaysia Vietnam Singapore United Kingdom Indonesia Canada France Germany India Italy Spain Russia

Note:

0%

Source: JNTO, Japan Tourism Agency, CBRE, March 2020

© 2022 CBRE, INC.

Creating Resilience

3.

Inbound tourist demand set to recover after lifting of foreign individual travel restrictions

Implications for the real estate market

The impact of lifting restrictions on FIT visitors is expected to be extremely consequential and should act as a catalyst to trigger the full-scale recovery of the inbound tourist market. The most significant real-estate related impact will be observed in the hotel and retail sectors. Urban areas, previously heavily reliant on inbound tourist demand, have been particularly slow to recover from measures to contain the pandemic. The lifting of FIT restrictions should kickstart the recovery of demand in these still struggling areas. Combined with foreign tourists’ increased spending power as a result of the weak yen, CBRE expects to see a spike in demand, particularly in the high-end bracket of the hotel and retail sectors.

Contacts

Yoshitaka Igarashi

Kaoru Kurisu

Hotel Team Director yoshitaka.igarashi@cbre.co.jp

Retail Team Leader Director kaoru.kurisu@cbre.co.jp

Hiroshi Okubo Head of Research hiroshi.okubo@cbre.co.jp

© Copyright 2022. All rights reserved. This report has been prepared in good faith, based on CBRE’s current anecdotal and evidence based views of the commercial real estate market. Although CBRE believes its views reflect market conditions on the date of this presentation, they are subject to significant uncertainties and contingencies, many of which are beyond CBRE’s control. In addition, many of CBRE’s views are opinion and/or projections based on CBRE’s subjective analyses of current market circumstances. Other firms may have different opinions, projections and analyses, and actual market conditions in the future may cause CBRE’s current views to later be incorrect. CBRE has no obligation to update its views herein if its opinions, projections, analyses or market circumstances later change.

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