Japan faces a sharp economic setback as escalating tensions with China trigger a collapse in Chinese tourist arrivals, threatening to wipe out nearly $9.59 billion from the economy over the next year. The estimate, from Nomura Research Institute, comes amid a wave of cancellations following Beijing’s warning urging citizens to avoid travel to Japan.
The diplomatic row flared earlier this month after newly appointed Japanese Prime Minister Sanae Takaichi suggested Tokyo could deploy military forces if conflict erupted in the Taiwan Strait. Beijing responded with multiple travel advisories, delays to bilateral forums, and stronger scrutiny of outbound travel.
Chinese airlines have since reported around 4,91,000 cancellations this weekend alone, representing roughly 32 percent of bookings to Japan. Several major travel agencies in China have halted Japan packages, while at least seven airlines have agreed to refund Japan-bound tickets for the rest of the year.
The impact extends beyond the aviation and tour sectors. China’s state-owned enterprises have begun quietly discouraging employees from travelling to Japan, resulting in many abandoning pre-booked holidays—often with partial or no refunds. Workers at hospitals, research institutes and industrial firms said approvals for foreign travel had been withheld or revoked, effectively blocking their trips.
For Japan, the timing is particularly damaging. Chinese tourists remain the country’s largest inbound segment, accounting for 7.49 million visitors in the first nine months of the year and 23.7 percent of all arrivals. A continued 25 percent decline—similar to the drop seen during the 2012 Diaoyu/Senkaku Islands dispute—would cut expected Chinese tourist spending from ¥3.15 trillion to ¥1.65 trillion over the next 12 months, Kiuchi said. He also projected a separate ¥290 billion hit from a fall in visitors from Hong Kong.
The worsening travel sentiment coincides with financial stress in Tokyo. The yen slipped beyond 155 per dollar this week, touching a nine-month low, while bond yields spiked amid uncertainty over the government’s stimulus strategy. A prolonged slump in Chinese arrivals, Kiuchi warned, equals 0.29 percent of Japan’s GDP and could intensify if Beijing tightens trade flows or restricts exports of rare earths.
The dispute has halted what had been a rapid rebound in tourism, fuelled by a weak yen that made Japan one of Asia’s most affordable destinations. Unless diplomatic ties stabilise, analysts warn that Japan’s tourism-led recovery—and the broader economy—faces mounting downside risks.