Japan welcomes Chinese consumers

Chinese tourists are to Japan today what the Japanese were to Manhattan and Honolulu during the late 1980s: the single fastest-growing group of overseas travelers and the highest spenders. On Thursday, Japan will significantly relax its visa regulations for Chinese tourists, in a move that will enable another 16 million households 10 times the size of the current pool of potential travelers to apply for a trip to Japan.

Up to now, travel visas have been distributed only to wealthy Chinese with relatively high annual incomes; from Thursday, the government will significantly lower its annual income threshold for Chinese tourists, paving the way for "middle class" Chinese to visit Japan.

The massive influx of Chinese visitors and more importantly, their purchasing power, has spurred Japanese retailers and other service providers to adapt and cater to this new stream of relatively high spenders.

Japan, a country not known for its openness to outsiders, has rolled out the red carpet for the Chinese as some of its industries become increasingly dependent on their spending, amid worrisome deflation and a slump in domestic spending.

The new welcome for China's travelers is just one of the many ways in which Japan has increased its dependence on its neighbor to the west. China last year displaced the U.S. as the biggest importer of Japan's goods.

For Japan's struggling department stores, adapting to the lucrative Chinese consumer is crucial. Department-store sales have declined for 27 straight months, according to the Japan Department Store Association.

Meanwhile, a survey of 40 department stores conducted by the JDSA found that spending by foreign tourists led by Chinese has risen every month but one since March 2009.

In May, spending by Chinese and other foreign tourists rose 50% from a year earlier, while overall sales fell 2.1% from the previous year. "It's the only area that's growing," a JDSA spokeswoman said.

According to the Japan Tourism Agency, Chinese visitors each spend about 116,568 yen (about $1,300), compared with 70,000 yen for Taiwan visitors and 25,000 for Americans.

In Ginza, Tokyo's fanciest shopping district, Mandarin is spoken as much as Japanese.

Department store Mitsukoshi Ginza has five sales assistants who speak Chinese, one stationed at its counter for Shiseido Co., Japan's largest cosmetics company and a well-known brand in China.

"From January to May this year, the number of Chinese consumers who bought duty-free goods increased by 40% compared with last year," said Tomomi Yun, spokeswoman for Mitsukoshi's Ginza store. The store is adding seven more staff in September who speak Chinese or English. Between 2% and 3% of Mitsukoshi's sales are to foreign tourists the majority of whom are Chinese but the pace of growth has been rapid: Five years ago, that figure wasn't even 1%, according to Ms. Yun.

"From an overall macroeconomic perspective, the impact of Chinese tourists is still not so big on overall retail sales," says Masaaki Kanno, chief economist for J.P. Morgan in Tokyo. "But the trend is positive. Department stores in Tokyo and large stores in [the city's electronics district] Akihabara will become big beneficiaries of the relaxed visa rules."

The Japan Tourism Agency aims to more than triple the number of Chinese tourists to 3.9 million in 2013 from 1.01 million last year. South Koreans are still the single biggest nationality of tourists to Japan, with 1.59 million having visited in 2009. But the Chinese are set to overtake them in 2013, according to the JTA.

That trend is influenced by a decline in South Korean tourists to Japan over the past three years. Exchange rates appear to be one factor behind the decline. In late 2008 the South Korean won hit its lowest level against the yen since 1997. Tokyo hopes that as South Korea's currency strengthens, its consumers will return.

Miki Sato, a spokeswoman at Japan Travel Bureau, the country's leading travel agency, says Chinese consumers in Japan like to buy rice cookers, digital cameras, makeup and luxury goods, such as Louis Vuitton handbags.

"Chinese tourists tend to care if products are made in Japan and are more conscious about brands like Panasonic or Sony," said a spokesman at Yamada Denki Co. Ltd., the country's leading electronics retailer.

Hotels expect to check in more Chinese guests as a result of the new, relaxed visa requirements for Chinese tourists. Prince Hotels Inc., which operates 45 hotels in Japan, expects at least a 10% increase in the number of Chinese guests by the end of March 2011.

Ms. Sato from Japan Travel Bureau says Japanese hotels and service providers have had to adapt to the tastes of the Chinese. One culinary divide: The Chinese don't eat cold rice. "For tour groups, that means not offering Japanese onigiri [rice balls] or bento [pre-packed lunch boxes]," she says.