Osaka, one of Japan's leading tourist cities, is taking a direct hit from the China-Japan conflict. Flights at Kansai International Airport have fallen by the largest margin in the country, and hotels, retailers and restaurants are also seeing damage from a drop in visitors.
Bloomberg said on Dec. 9 that Osaka, a city symbolic of Japan's high dependence on Chinese tourism and its second-largest economic hub, is taking the brunt of the current tourism decline, and that the sudden exodus of Chinese tourists—triggered by Beijing's travel restraint after the Japanese prime minister's remarks on Taiwan—threatens one of the few positive elements of Japan's economy.
According to digital marketing corporations China Trading Desk, bookings for winter and early spring flights to Osaka from China have dropped by 55% to 65%. Bloomberg reported that this is a steeper decline than the national average, with cancellations particularly concentrated at Kansai International Airport.
Other indicators also show the hit to Osaka's tourism industry. The Osaka Convention & Tourism Bureau said some hotels are seeing cancellation rates of 50% to 70%, and Namba, Osaka's main transport and leisure hub, has suffered the most. Chinese tourists' luxury spending in Osaka runs at $40 million to $60 million a month (about 58.8 billion to 88.2 billion won), and it is expected to fall by roughly half from previous levels.
Lin Denryu, who operates about 80 vacation rentals in central Osaka, said that more than 600 bookings have been canceled through the end of the year since the China-Japan tensions escalated last month. Lin said everyone in real estate and travel is struggling, and warned that if this trend continues, it could grow into a broader crisis across the industry.
Gomiya Hiromu, an economist at the Japan Research Institute (JRI), projected that if the travel halt continues, Japan's economic losses next year could reach up to 1.2 trillion yen (about 940 billion won). Gomiya said the pressure will intensify ahead of the Lunar New Year holiday and that winter destinations such as hot springs and ski resorts could be heavily affected.
Japan's tourism industry began to wobble after Japanese Prime Minister Sanae Takaichi last month suggested the Self-Defense Forces might intervene in the event of a Taiwan Strait crisis. Following Takaichi's remarks, the Chinese government strongly urged its citizens to refrain from traveling to Japan, and Chinese airlines successively canceled flights to Japan.
Osaka is considered one of the Japanese cities most dependent on Chinese tourists. In particular, during the Osaka-Kansai Expo, which ran for six months starting in Apr., the number of Chinese visitors rose about 50% from usual, amplifying the shock from the current situation.
Even if China-Japan relations improve, it will likely take time for Osaka's tourism industry to recover. Subramania Bhatt, CEO of China Trading Desk, said that even if routes from China to Japan resume after Mar. next year, it may be difficult to fully win back travelers who have already shifted to Korea and Southeast Asia. Bhatt projected that Japan will recover only half to at most two-thirds of the Chinese tourists who left over the next 12 to 18 months.
Some say the China-Japan conflict could instead become a catalyst for structural reforms in Japan's tourism industry. Akiko Kosaka, a senior researcher at JRI, said the sharp decline in Chinese tourists could ultimately help Japan pivot toward further diversifying its visitor base, adding that each region's position in the tourism market could also see bigger changes.