Japan has been one of the biggest recipients of Chinese tourism and tourist spending over the last five years, but 2018 has been a mixed bag for Japan’s tourism industry. Total tourist arrivals to Japan were up 15.6 percent in the first half of 2018, reaching 15.89 million. The largest source market was, of course, China: Chinese tourist arrivals increased by 23.6 percent to 4.05 million. Yet despite the record rises, this year also saw something somewhat unprecedented for Japan–a major monthly drop in arrivals for the first time in five years.

September saw a 5.3 percent year-on-year drop in overall arrivals. Chinese arrivals fared a bit better during the month, with a drop of only 3.8 percent. But South Korean arrivals fell by 14 percent from the previous year. The main culprits behind the drop were undoubtedly Typhoon Jebi, which made landfall in Japan on September 25, and a magnitude 6.7 earthquake on Japan’s Hokkaido island that killed 40 people. Of course, this doesn’t represent a fundamental challenge to Japan’s tourism offerings in the Chinese market or elsewhere. There is no indication that September’s drop is the beginning of a longer-term downturn. Nonetheless, a drop is a drop, and Japan will be playing catch-up to get back to the tourism growth rates the country saw earlier this year.

Along with these temporary challenges, Japan’s tourism industry is also grappling with larger changes to Chinese tourism that threatens retailers but could also present major opportunities. The most obvious change has been how Japanese retailers (duty-free retailers in particular) have had to alter their offerings in order to attract Chinese tourist spending. The same report that indicated a rise in arrivals of 15.6 percent in the first half of 2018 also indicated that there was a drop in per-visitor spending of 3.5 percent between April and June. It’s possible that this is due in part to the broader trend this year of a slow in spending per capita by Chinese tourists specifically by 14.2 percent. Of course, the exact impact on the spending-per-visitor drop between April and June by Chinese tourists is challenging to fully gauge.

What is clear, however, is that Japanese retailers are changing what they have on offer for Chinese tourists. Overall, the big-ticket items that Chinese tourists spent small fortunes on at Japanese retailers in the past are simply not as popular as they were before. High-quality, expensive home appliances were particularly popular among Chinese tourists only a few years ago, with perhaps the most novel being Japan’s famously “high-tech” toilet seats.

What’s more popular now are cosmetics, basic household goods, and small-ticket accessories and souvenirs. Some retailers that previously catered to higher-spending Chinese tourists are now putting more focus on cheaper souvenirs and cosmetics.

Nonetheless, it seems that well-established discount retailers are the retailers that are experiencing increased spending from Chinese tourists. While the products are generally from the “luxury” category, they still offer a certain sense of Japanese style. The brand that perhaps best epitomizes this trend is Muji, which sells clothing, stationery, snacks, linens, and kitchenware, among other things. Muji even opened its own hotel in Shenzhen this year. Perhaps one of the hotel’s most creative innovations is its retail synergy, as over 70 percent of Muji goods used in the hotel’s rooms are available for purchase.

Don Quijote is another discount retailer that has become more popular among Chinese tourists for products similar to Muji’s. The chain sells household goods, small-ticket appliances, snacks, and more, and it offers its products online through direct-shipping to China duty-free (not to mention that they’re also integrated with WeChat Pay, a favorite of Chinese travelers.) With this strategy, the chain can turn Chinese tourists into repeat customers, even after they go home.

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