Forex Flash: The Asian tourism boom and Japan – Nomura

FXstreet.com (Barcelona) - Tomo Kinoshita, Chief Japan Economist for Nomura notes that Japan has strengthen its economic ties with the rest of Asia as Asian economies have continued to expand.

Asia is experiencing a tourism boom and the number of foreign visitors to 12 countries/regions in Asia(Japan, China, Korea, Taiwan, Hong Kong, the ASEAN 6 and India) has risen sharply from 160m in 2001 to 220m in 2006 and 280m in 2011.

Kinoshita states that "Gross travel receipts account for over 5% of GDP in Hong Kong, Thailand, Singapore, and Malaysia, making a sizeable contribution to growth in their economies. The primary driver has been people traveling within the Asian region."

However, the story is not completely rosy and Kinoshita highlights the worsening relationship between Japan and its neighbors as something which will most likely have an effect on the growth story.

He writes, "It looks increasingly likely that the number of visitors to Japan from China will decline in the near term as a result of the recent worsening Japan-China relations. The number of Chinese visitors fell by around 25% in the immediate wake of the September 2010 incident when a Chinese trawler collided with Japanese patrol boats."

Should the current stressed situation continue, he estimates that Japan's GDP growth could well be depressed by 0.03% and the number of Chinese visitors to Japan is only likely to return to an uptrend when bilateral relations normalize.

However, the annual number of foreign visitors to Japan increased 1.8 fold between 2001 and 2010 and based on a strong growth assumption for the Asian middle class who can afford to travel abroad. Kinoshita believes that despite the recent troubles, "Japan will see opportunities to expand its tourism related industries even as it faces low economic growth."

He finishes by noting that the Japanese Government aims to increase the number of tourists from 18m by 2016 from 8.3m (on an annualized basis) in 2012. However, he believes that the Government needs to step up efforts to diversify what is on offer for foreign visitors in order to attain such a goal.

Sourced: community