Osaka tourism endures heavy hit as China-Japan tension simmers

OSAKA - Mr Denryu Lin, who runs about 80 vacation rentals in central Osaka, is watching his business evaporate since late November as

tensions between Tokyo and Beijing escalate.

Over 600 bookings – more than 1,000 Chinese guests – have been canceled through year-end, he said.

“Everyone I know in real estate and the travel industry is struggling,” he added, underscoring a sense of sector-wide stress that could tip into a broader crunch if the pullback persists.

Osaka, Japan’s second-largest economic hub and one of the clearest symbols of the nation’s reliance on Chinese tourism, is bearing the brunt of the pullback. Kansai International Airport has logged the steepest flight cuts nationwide, while hotels, retailers and restaurants face waves of cancellations.

Chinese visitors are Japan’s biggest spenders, accounting for a fifth of the nation’s ¥8.1 trillion tourism revenue. Their sudden retreat – triggered by Beijing’s advisory after the Japanese prime minister’s Taiwan remarks – threatens one of the few bright spots for Japan’s economy.

China bookings for Osaka-bound for winter and early spring departures are down 55 per cent to 65 per cent – a sharper drop than the nationwide average, with Kansai International Airport carrying a disproportionate share of cancellations, according to market researcher China Trading Desk. Luxury spending by Chinese visitors in Osaka is projected to fall roughly by half to US$40 million to US $60 million a month, it said.

Japan’s economic loss could reach ¥1.2 trillion next year if travel freezes persist, Mr Hiromu Komiya, an economist at the Japan Research Institute, said, adding that a quick easing of tensions could limit the damage at around ¥500 billion.

The reversal comes after Osaka enjoyed a nearly 50 per cent surge in Chinese arrivals earlier this year, fueled by the six-month World Expo that boosted tourism across the region.

Now, local reports and social media posts point to thinner crowds in Shinsaibashi and Shinsekai, once favorite haunts for Chinese groups, with tour buses disappearing and eateries reporting fewer customers.

Some hotels cite cancellation rates of 50 to 70 per cent, with Namba, a major transport and recreation hub in Osaka, hit the hardest, according to Osaka tourism office.

The pressure is expected to intensify heading into Lunar New Year, said JRI’s Komiya, adding winter destinations such as hot springs and ski resorts may feel the strain.

China has ordered the country’s airlines to reduce flights to Japan through March 2025. Even if routes return after March 2026, Japan may not fully regain market share as travelers shift to South Korea and South-east Asia, said Mr Subramania Bhatt, chief executive officer of China Trading Desk.

“Japan can claw back maybe half to two-thirds of the lost Chinese volume over the following 12 to 18 months,” Mr Bhatt said. “But the era of treating China as an endlessly reliable growth engine for Japan tourism and for places like Osaka in particular is over for now.”

That shift is forcing Japan to lean harder on other markets to fill the gap.

At Stargate hotel Kansai Airport in Osaka, Chinese customers have dropped 20 percentage points to 30 per cent from pre-pandemic levels, said Mr Jiro Kobayashi, director of rooms. The property is eyeing South-east Asia, Taiwan and South Korea to backfill demand, he said. Kyoto’s Yojiya cosmetics chain reported a 10 per cent drop in sales to Chinese in late November but offset losses with domestic demand.

Japan has been pushing its regions to broaden their visitor mix since post-pandemic reopening. Progress is uneven but visible. In Gifu, Chinese guests now make up 10 per cent of stays, down from 41 per cent in 2019, according to government data. In Shizuoka, that number has fallen to 45 per cent from 71 per cent. 

Retailers are also adjusting. Matsuya Co.’s flagship Ginza store saw duty-free sales fall about 15 per cent last month from a year earlier, though overall sales dipped just 1.2 per cent. Takashimaya Co. posted a 3.1 per cent duty-free decline but overall revenue rose 3.5 per cent. 

Drugstore chain MatsukiyoCocokara & Co., which derives about 6 per cent of total sales from inbound travelers, said it has yet to see a major impact and remains focused on domestic demand.

The abrupt decline in Chinese tourism may ultimately help accelerate Japan’s pivot toward a more diverse visitor base, said Mr Akiko Kohsaka, a senior researcher at JRI.

“It may prompt further shift in how regions position themselves in the market,” she said. “It’s important to lay the groundwork for the future.” BLOOMBERG