Japan Needs Billionaires Like Jack Ma, Not Just More Tourists

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From Justin Bieber to Jack Ma, foreign visitors are being spotted everywhere in Japan these days.

After opening its borders last month, nearly half a million people descended upon the country. Prime Minister Fumio Kishida wants to boost annual spending by foreign tourists to 5 trillion yen ($36 billion), above the 4.8 trillion yen recorded in 2019 before the pandemic hit. China’s Covid Zero makes that difficult — Chinese not only made up around one-third of visitors, they were also among the highest-spending by nationality, dropping 33% above the average during their stay.

With hotels and restaurants already struggling to find enough staff to cope, some are asking if the country’s pre-pandemic obsession with boosting the sheer volume of tourists has been a misstep — and what it can do to get fewer tourists to spend more.

Before the pandemic, Japan shattered target after target as it became a major tourist destination. But the contribution to the economy from the boom had already begun to plateau. It’s a problem at least partly of Japan’s own making. Belying its expensive reputation — Tokyo and Osaka frequently hover near the top of expat-focused cost-of-living surveys — the country is simply too cheap. That’s a legacy of three decades of little-to-negative inflation, a race to the bottom by restaurateurs and manufacturers to cut costs, as well as the impact of the weak yen. As many arrivals are noticing, some things can be simply astoundingly cheap, from dining (it’s trivially easy to get a high-quality lunch in central Tokyo for just $5) to hotels.

On a recent visit to Kyoto’s Fushimi Inari Shrine, the issue was clear. While visitors thronged its iconic tunnels of endless red torii gates, few seemed to be spending any money. Shinto shrines, seen as a public good for the surrounding community rather than a tourist trap, almost invariably don’t charge for entry. Instead, visitors are generally expected to drop a few coins at the saisen box before they pray, buy items such as omamori amulets said to provide luck, or pay to affix a seal to goshuin stamp books.

But most of the crowd, made largely of seemingly wealthy Asians, Europeans and North Americans, simply skipped past the parts asking for money — lacking interest, knowledge of the traditions or both, and therefore getting the entire experience for free. It seems an apt metaphor for the overall tourist issue: Visitors would no doubt be happy to pay more if they were asked to, but Japan has not figured out how to extract more value from them.

It’s difficult to imagine that Japan could, like some countries do, charge foreigners but not locals at such sites, or otherwise implement a two-tier system. An increase in the paltry 1,000 yen visitor tax levied at airports is likely overdue, but won’t make that significant a dent.

One option that’s gathering increasing attention is to better attract the whales of international travel — the super-rich that spend orders of magnitude more than the average traveler. The Japan Tourism Agency says that these so-called high value-added travelers(1) make up just 1% of visitors, but already account for nearly 12% of spending.

One group of lawmakers has criticized the country’s failure to attract these big spenders until now, saying that the opportunity loss is “incalculable.” It wants to boost Japan’s ability to accept not just those traveling in first class, but the type who arrive by private jet or super yacht.

The country lacks destinations for such deep-pocketed tourists, as well as things for them to do. The Kansai area that encompasses Kyoto needs 1,300 more luxury hotel rooms(2) in the coming years, according to the Development Bank of Japan.

Much of the problem lies in how quickly Japan’s tourist infrastructure has been created. For years, foreigners largely avoided Japan due to its expensive reputation and relative inaccessibility; amid a boom in the 2010s, engineered by expanded visa waivers, operators largely adapted existing infrastructure designed for domestic travelers, who typically take ultra-short vacations of on average two nights, and prioritize affordability and convenience over luxury.

While Kyoto, which has opened hotels such as the prestigious Hilton-owned Roku during the pandemic, is better equipped than most, there’s still one problem.

“If people don’t come from overseas, there’s no one to stay on weekdays,” said Shingo Fujiwara, the manager of the recently opened Marufukuro, a boutique luxury destination in Kyoto. It combines the art-deco design of Nintendo Co.’s original headquarters with a new wing designed by Tadao Ando, the architect famed for his minimalist concrete structures such as St. Louis’s Pulitzer Arts Foundation museum or Osaka’s Church of the Light.

To better attract well-off foreign clientele, he says tourism needs to move to catering to repeat visitors by offering unique experiences they can’t encounter elsewhere.

A shift away from focusing on the sheer number of visitors might also help address complaints about overtourism, which became a focus in Kyoto before the pandemic, with locals increasingly pushed out of central areas as developers favored cheap hotels instead of apartments.

For all it has devastated the hospitality sector, the pandemic has given it a chance to reset and think again. As Jack Ma’s sojourn shows, Japan has much to offer the ultra-rich — it now needs to figure how to attract more of them.