Role of tourism on economic sustainability in Japan

¶ … role of tourism on economic sustainability in Japan

General Economic Overview of Japan

With a gross domestic product of $4,290 billion, Japan is currently the fourth largest economy of the globe, after the European Union, the United States and China (Central Intelligence Agency, 2008). The economic growth has been basically sustained by the reproduction activities, basically materialized in "childbirth, education and socialization, along with the everyday revitalization of the labour force" (Hiroko, 2004). The state officials made increased efforts to sustain the industrial development and invested impressive sums of money into technological innovations. Japan still outperforms the United States in terms of total factor productivity growth. Japan also registers higher shares of investment in the gross domestic product than the average of most countries (Balassa and Noland, 1988).

Japan used to base its economy on agricultural activities, but they are now turning to incomes from services. Agriculture is declining and it is now among the highest subsidized activities in Japan, and among the highest subsidized agricultural activities within the world. Japan is generally self sufficient in producing rice, but they import about 55% of the food supplies. Economic growth has been at an average of 10% for the 1960, 5% in the 1970 and 4% in the 1980s. In the 1990s, the growth had declined to an average of 1.7%, generally due to over privatization and over investments and the price bubble. More recently, the economy of Japan has been negatively impacted by the economic slowdown in the United States, Europe and other Asian countries. The country is fighting to strengthen its position and still remains a reliable player. "Nevertheless, Japan's huge government debt, which totals 182% of GDP, and the aging of the population are two major long-run problems. Some fear that a rise in taxes could endanger the current economic recovery. Debate also continues on the role of and effects of reform in restructuring the economy, particularly with respect to increasing income disparities" (Central Intelligence Agency, 2008).

The primary issue with Japan's economic growth and sustainability is that of an increasing inflation. The country has registered years of deflation, but the negative phenomenon has returned in 2008. Another issue is that of an increased federal debt. To control it, the state officials must limit the government expenditures and achieve fiscal consolidation. Another issue at hand is that of developing tax reforms to enhance the economic growth and fiscal sustainability. Also, since the largest contribution to the GDP comes from the service sector, its productivity has to be increased in the future. Finally, the labor market has to be restructured and reformed as to best cope with the increasing dualism and the aging of the population (Economy Watch).

2. General Overview of Tourism in Japan

It is only in the past recent decades that Japan increased its efforts to sustain tourism. Up until the 1980s, the country failed to see tourism as a means of attracting foreign incomes. Starting with the 1990s however, the officials in Japan took "a more active role in promoting inbound tourism. Japan has a well organized tourist industry. The government is involved with both domestic and international tourism, with offices in many cities of the world outside of Japan. The government has also established a number of programs and offices to develop a broad variety of tourist attractions in Japan while maintaining the quality of its natural environmental settings" (Hudman, Jackson and Essa, 2002).

Most of the tourists in Japan come from China, Taiwan and Korea. Since 2004 for instance, the primary destination of the citizens in Hong Kong has been Japan (Cochrane, 2008). In the period January - July 2007, Japan had received a total of 3,944,194 visitors, a 12% increase as compared to the same period of the previous year. In the period July - December, the number of tourists had reached 4,402,775, a 15.5% increase as compared to the same period of 2006. Overall, the increase in tourists in 2007 as compared to 2006 has been of 13.8%. In contrast however, the number of Japanese people travelling abroad is decreasing with every year. The average of January - December 2007 was of 17,294,935, a 1.4 decrease as compared to January - December of 2006 (Japan National Tourist Organization, 2008).

About 16.2% of the total tourists come from the United States. There are three primary reasons why Japan finds it difficult to attract tourists from North America and Europe. They materialize in the following:

the main attractions in Japan are related to culture, traditions, history and customs, which only appeal to a narrow palette of consumers the cultural barrier, most often materialized in the language barriers, often prevents people from visiting, and the costs are quite high, therefore tourists are hesitating (Hudman, Jackson and Essa, 2002)

The touristy industry has played an important role in the increase of gross domestic product and has sustained the economic growth of Japan. But even so, there are voices that militate against it, as they believe it damages the cultural features. Japan is a mystical land of traditions and long standing history and excessively opening it to the western civilizations in order to register more income may result in the objectification of the Japanese ways (Hiroyuki, 2003).

The top destinations include Tokyo (for both the Japanese culture, but also for hosting the Disneyland), Kyoto, Osaka, Hiroshima, Nagasaki, Kamakura or Takayama (Japan Guide, 2008)

4. Economic Impacts of Tourism in Japan

Starting with the 1990s, when Japan promoted its values and cultures as a means of attracting foreign visitors, the proportion of revenues from touristy activities in the gross domestic product increased significantly. The main specification relative to the impact of tourism upon the overall Japanese economy could be succinctly presented as follows:

in 2000, the touristy industry generated incomes of approximately $180 billion; the sum was estimated to generate 1.97 million direct employment, 2.9% of the total employment

The sum of direct and triggered production effect concerning the above tourism consumption was estimated to be 53.8 trillion yen (430 billion yen, equivalent to 5.7% of total domestic production), which was estimated to generate 4.22 million employment (corresponds to 6.3% of total domestic employment)" (Organization for Economic Cooperation and Development, 2002) in 2001, the travel balance revealed a deficit as the Japanese travellers were spending more abroad than the foreign visitors were spending in Japan; in 2007 the balance revealed a surplus as the number of visitors increased and the number of Japanese spending their vacations abroad decreased the remote islands of Japan also attract large numbers of tourist, but the studies conducted along the years revealed that the income from touristy operations in these regions does not have a statistically significant impact (Ishikawa and Fukushige, 2006)

In 2000, the touristy industry accounted for 2.2% of the total GDP and 2.9 in the employment; the proportions are expected to increase and are still considered relatively low in comparison to other countries, generally due to the tardy response of the Japanese authorities. "As the tourism market continues to grow steadily, tourism industry is expected to become the leading industry of Japan throughout the 21st century" (Organization for Economic Cooperation and Development, 2002).