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Japan: From outsider to superpower

Against the backdrop of a thriving inbound tourism market and preparation for the 2020 Olympic Games, we provide an overview of Japan’s unprecedented Tax Free Shopping growth.

Recent years have seen Japan rise to become one of the most popular travel destinations in the world. In 2017, a record 28.7 million tourists visited Japan, increasing +19% from 2016. This is good news for the country, which is well on its way to reaching its target of 40 million annual visitors ahead of the 2020 Olympic Games.

A boost from major origin markets; China and South Korea

In 2017, 7.35 million Chinese tourists visited Japan, up +15% from the previous year. Of notable impact was the increased travel from China’s tier two and three cities thanks to higher disposable incomes and better flight connectivity. With Japan representing a convenient and ‘safer’ destination, it is one of the most popular options amongst this newer traveller group.

In addition, inbound tourism numbers from South Korea increased by +40% in 2017, to 7.14million visitors, as South Koreans favoured Japan over traditionally popular China. This is against the backdrop of diplomatic disputes between the two countries.

What is the impact on Japan’s Tax Free Shopping?

Reflecting the inbound tourism boom, Japan’s Tax Free Shopping performance is also thriving. According to Global Blue data, sales-in-store have shown remarkable growth of +51% from April 2017 to March 2018.

Chinese Globe Shoppers are Japan’s largest market, representing 65% of the country’s Tax Free Shopping results. Sales-in-store progression from the Chinese Globe Shopper market posted an impressive +73% growth from April 2017 to March 2018.

Meanwhile, spend by South Korean Globe Shoppers is growing fast. From April 2017 to March 2018, this nationality represented 5% of the country’s Tax Free Shopping spend in Japan, explained by the +43% growth of sales-in-store. 

What favourable conditions are driving this growth?

In preparation of the 2020 Olympic Games, the Japanese Government has developed numerous initiatives to stimulate the tourism industry. These include improved access to visas for countries like China, Indonesia and Thailand and significant investment in promotional tourism campaigns.

In parallel, positive macro trends include a weaker yen (trading below ¥110 to the dollar for most of 2017), which made travelling and shopping in Japan more affordable. This had a positive impact on average spend per transaction, which increased +10% across all Globe Shopper nationalities from April 2017 to March 2018.

Finally, the Tax Free Shopping process in Japan is very easy for travellers; minimal input is required, as the VAT is deducted from the total purchase amount, in-store. This has led to a high ratio of completed refunds, highlighting the importance of making the Tax Free Shopping process as easy as possible for Globe Shoppers.