Tourism Recovery Helps Japan Grow in First Quarter

TOKYO—Japan’s economy showed a bigger-than-expected upswing in the first quarter, helped by a recovery in tourism that offset sluggishness in some leading economies.

Japan has just begun to benefit from post pandemic pent-up demand of the kind the U.S. experienced more than a year ago. Tokyo waited until last October to remove border controls for overseas tourists and lifted restrictions on big events earlier this year.

The world’s third-largest economy after the U.S. and China expanded 0.4% in the three months to March from the previous quarter, government data showed Wednesday, slightly above forecasts.

The Japanese economy grew at an annualised rate of 1.6%, outpacing 1.1% growth for the same quarter in the U.S., where high inflation and rising interest rates hit consumers. In China, another top market for Japanese-made goods, recent economic indicators such as the youth unemployment rate and retail sales have pointed to a sluggish recovery.

Economists say the main growth driver in Japan remains domestic demand. Spending is likely to pick up further after recent wage negotiations resulted in the biggest pay increase in three decades. The pace of inflation has slowed recently thanks to the government’s measures to ease the impact of higher energy prices and declines in import prices.

Overall consumer prices in Japan rose 3.2% from a year earlier in March, compared with 4.9% inflation in the U.S. in April.

In the January-March period, private consumption in Japan increased 0.6% from the previous quarter. Government travel subsidies boosted spending on hotels and restaurants.

Economy Minister Shigeyuki Goto said the economy would likely continue a modest recovery, supported by higher wages and corporate investment.

“We will realise sustainable economic growth led by private demand,” he said.

In another positive sign, the number of foreign tourists is quickly approaching the pre pandemic level, and those tourists are spending more than they did before the pandemic.

Spending per international visitor in the January-March quarter was ¥212,000, equivalent to $1,553. That was 44% more than the average visitor spent in the same period in 2019, according to the Japan Tourism Agency.

While domestic spending is likely to stay healthy this summer, the risk of slower growth in the U.S., China and elsewhere looms over the Japanese economy.

“Goods exports and production will struggle so long as the global economy flirts with recession,” said Stefan Angrick, an economist at Moody’s Analytics.

Japan’s exports dropped 4.2% in the first quarter from the one before it due to slowing growth abroad triggered by monetary tightening in the U.S. and other countries as well as weaker chip demand.

As Paris makes its final preparations for the Olympic games, its residents are busy with their own—packing their suitcases, confirming their reservations, and getting out of town.

Worried about the hordes of crowds and overall chaos the Olympics could bring, Parisians are fleeing the city in droves and inundating resort cities around the country. Hotels and holiday rentals in some of France’s most popular vacation destinations—from the French Riviera in the south to the beaches of Normandy in the north—say they are expecting massive crowds this year in advance of the Olympics. The games will run from July 26-Aug. 1.

“It’s already a major holiday season for us, and beyond that, we have the Olympics,” says Stéphane Personeni, general manager of the Lily of the Valley hotel in Saint Tropez. “People began booking early this year.”

Personeni’s hotel typically has no issues filling its rooms each summer—by May of each year, the luxury hotel typically finds itself completely booked out for the months of July and August. But this year, the 53-room hotel began filling up for summer reservations in February.

“We told our regular guests that everything—hotels, apartments, villas—are going to be hard to find this summer,” Personeni says. His neighbours around Saint Tropez say they’re similarly booked up.

As of March, the online marketplace Gens de Confiance (“Trusted People”), saw a 50% increase in reservations from Parisians seeking vacation rentals outside the capital during the Olympics.

Already, August is a popular vacation time for the French. With a minimum of five weeks of vacation mandated by law, many decide to take the entire month off, renting out villas in beachside destinations for longer periods.

But beyond the typical August travel, the Olympics are having a real impact, says Bertille Marchal, a spokesperson for Gens de Confiance.

“We’ve seen nearly three times more reservations for the dates of the Olympics than the following two weeks,” Marchal says. “The increase is definitely linked to the Olympic Games.”

Worried about the hordes of crowds and overall chaos the Olympics could bring, Parisians are fleeing the city in droves and inundating resort cities around the country.
Getty Images

According to the site, the most sought-out vacation destinations are Morbihan and Loire-Atlantique, a seaside region in the northwest; le Var, a coastal area within the southeast of France along the Côte d’Azur; and the island of Corsica in the Mediterranean.

Meanwhile, the Olympics haven’t necessarily been a boon to foreign tourism in the country. Many tourists who might have otherwise come to France are avoiding it this year in favour of other European capitals. In Paris, demand for stays at high-end hotels has collapsed, with bookings down 50% in July compared to last year, according to UMIH Prestige, which represents hotels charging at least €800 ($865) a night for rooms.

Earlier this year, high-end restaurants and concierges said the Olympics might even be an opportunity to score a hard-get-seat at the city’s fine dining.

In the Occitanie region in southwest France, the overall number of reservations this summer hasn’t changed much from last year, says Vincent Gare, president of the regional tourism committee there.

“But looking further at the numbers, we do see an increase in the clientele coming from the Paris region,” Gare told Le Figaro, noting that the increase in reservations has fallen directly on the dates of the Olympic games.

Michel Barré, a retiree living in Paris’s Le Marais neighbourhood, is one of those opting for the beach rather than the opening ceremony. In January, he booked a stay in Normandy for two weeks.

“Even though it’s a major European capital, Paris is still a small city—it’s a massive effort to host all of these events,” Barré says. “The Olympics are going to be a mess.”

More than anything, he just wants some calm after an event-filled summer in Paris, which just before the Olympics experienced the drama of a snap election called by Macron.

“It’s been a hectic summer here,” he says.

Hotels and holiday rentals in some of France’s most popular vacation destinations say they are expecting massive crowds this year in advance of the Olympics.
AFP via Getty Images

Parisians—Barré included—feel that the city, by over-catering to its tourists, is driving out many residents.

Parts of the Seine—usually one of the most popular summertime hangout spots —have been closed off for weeks as the city installs bleachers and Olympics signage. In certain neighbourhoods, residents will need to scan a QR code with police to access their own apartments. And from the Olympics to Sept. 8, Paris is nearly doubling the price of transit tickets from €2.15 to €4 per ride.

The city’s clear willingness to capitalise on its tourists has motivated some residents to do the same. In March, the number of active Airbnb listings in Paris reached an all-time high as hosts rushed to list their apartments. Listings grew 40% from the same time last year, according to the company.

With their regular clients taking off, Parisian restaurants and merchants are complaining that business is down.

“Are there any Parisians left in Paris?” Alaine Fontaine, president of the restaurant industry association, told the radio station Franceinfo on Sunday. “For the last three weeks, there haven’t been any here.”

Still, for all the talk of those leaving, there are plenty who have decided to stick around.

Jay Swanson, an American expat and YouTuber, can’t imagine leaving during the Olympics—he secured his tickets to see ping pong and volleyball last year. He’s also less concerned about the crowds and road closures than others, having just put together a series of videos explaining how to navigate Paris during the games.

“It’s been 100 years since the Games came to Paris; when else will we get a chance to host the world like this?” Swanson says. “So many Parisians are leaving and tourism is down, so not only will it be quiet but the only people left will be here for a party.”

Tourism Recovery Helps Japan Grow in First Quarter

Gross domestic product rose at 1.6% annualised pace in January-March period