Japan's Tourism Slump Deepens as Chinese Arrivals Fall 61%, While Other Markets Grow

A sharp fall after Japan's record tourism year

Japan welcomed a record 42.7 million international visitors in 2025, but January 2026 brought its first monthly decline in foreign arrivals in four years. Chinese tourist numbers fell 61% compared with January a year earlier, according to the Japan National Tourism Organisation (JNTO), as a diplomatic confrontation over Taiwan disrupted one of Japan's most valuable tourism markets.

Total foreign arrivals fell by a much smaller 4.9%. Visitors from South Korea, Taiwan, the United States and Southeast Asia helped cushion the loss, showing how Japan's visitor economy is changing even as businesses that depend heavily on Chinese customers face mounting pressure.

The weak yen continues to make Japan attractive to overseas travelers because their money buys more when converted into Japanese currency. Yet cheaper travel has not overcome the political dispute between Tokyo and Beijing, which has affected holiday bookings, airline schedules, hotel rates and spending in department stores.

Karin Nordin, a 33-year-old Malaysian who lived in Tokyo for more than a year, noticed the change after returning from Japan in early 2026. Hot spring towns such as Kusatsu and Zao, normally crowded with Chinese tourists, had become noticeably quieter. Hotel prices in tourist areas had stabilized and were no longer surging during holidays observed by mainland China.

As of March 28, 2026, the picture is uneven: Japan continues to attract large numbers of visitors, while shops, hotels and destinations accustomed to Chinese demand are adjusting to a sudden loss of customers. The effects also reach beyond tourism, because trips to Japan can encourage Chinese consumers to buy Japanese products and visit Japanese restaurant chains after returning home.

How Taiwan comments turned into a travel dispute

Prime Minister Sanae Takaichi set off the confrontation during a parliamentary session in November 2025. She suggested that a possible Chinese invasion of Taiwan could constitute an "existential threat" to Japan, a description that could provide legal justification for deploying Japanese troops.

China claims Taiwan as part of its territory and has vowed to reunite it with the mainland, using force if necessary. Takaichi's remarks brought security policy directly into a dispute that soon affected ordinary travel between the two countries.

Chinese officials urged tourists and students to avoid Japan. Formal travel advisories warned citizens about safety threats, and China's Foreign Ministry subsequently accused Takaichi of trying to revive Japan's militarist past.

Chinese Foreign Minister Wang Yi addressed the dispute at the Munich Security Conference in February 2026. He accused political forces in Japan of seeking a return to militarism and called for other countries to warn Tokyo:

Japanese people should no longer allow themselves to be manipulated or deceived by those far-right forces, or by those who seek to revive militarism. All peace-loving countries should send a clear warning to Japan: if it chooses to walk back on this path, it will only be heading toward self-destruction.

Japan responded through diplomatic channels, describing Wang's claims as "factually incorrect and ungrounded". Tokyo maintained that its defense capabilities respond to an increasingly severe security environment and are not directed against any particular country.

The exchange became the most serious diplomatic dispute between Japan and China in years. Tourism businesses have borne part of the cost as official warnings and political tensions influence where Chinese citizens choose to travel.

The decline accelerated from December to January

Chinese arrivals had already fallen 45.3% compared with a year earlier in December 2025, reaching approximately 330,400. The January decline of 61% was steeper still and was described as the sharpest fall on record. January also marked the first monthly drop in total foreign visitors since Japan lifted its COVID-19 travel restrictions.

The calendar complicates the comparison. Lunar New Year fell in mid-February in 2026 rather than January, moving a holiday that normally brings a surge of Chinese travelers into a different month. Even allowing for that shift, the contraction was substantial.

China had accounted for roughly a quarter of Japan's foreign visitors. Chinese travelers also represented the largest share of inbound spending, at 21%, according to the Japan Tourism Agency. Losing customers from that market affects both the number of people arriving and the kinds of purchases businesses can expect.

The main developments unfolded over several months:

• November 2025: Takaichi's parliamentary comments about Taiwan triggered the diplomatic confrontation, followed by Chinese warnings against travel to Japan.
• December 2025: Chinese arrivals fell 45.3% to approximately 330,400, while major department stores recorded declines in duty-free sales.
• January 2026: Chinese arrivals fell 61%, and total foreign arrivals declined 4.9%, ending four years without a monthly fall.
• February 2026: Lunar New Year fell in the middle of the month, while Wang Yi criticized Japan at the Munich Security Conference.

JTB Corporation, Japan's largest travel agency, forecasts 41.4 million inbound visitors in 2026, down 3% from the record 42.7 million in 2025. The forecast points to a retreat from last year's peak while still leaving Japan with a large tourism market.

Why the tourism surplus is shrinking

Japan's tourism surplus fell 10.4% compared with a year earlier in January to JPY 590.1 billion, approximately USD 3.7 billion. It was the eighth consecutive month of decline in this measure of the service economy.

A tourism surplus is the difference between what foreign visitors spend in Japan and what Japanese travelers spend abroad. Japan earns a surplus when incoming visitor spending is greater than outgoing traveler spending.

Inbound spending edged up slightly to JPY 819.4 billion in January. Spending abroad by Japanese travelers rose much faster, increasing 51.7% to JPY 229.3 billion. Subtracting the latter from the former produces the JPY 590.1 billion surplus.

Those figures explain why the balance weakened even though spending by foreign visitors rose a little. More money was being spent overseas by Japanese travelers, narrowing the gap between tourism receipts and tourism spending abroad.

The visitor figures and the spending figures therefore describe different parts of the same economy. Japan received fewer international arrivals in January, but the money spent by those who came still increased slightly. Meanwhile, the sharp rise in Japanese spending overseas put additional pressure on the surplus.

Department stores and regional businesses take the hit

Department stores and luxury retailers have been among the businesses most exposed to the loss of Chinese travelers. Their customers frequently buy cosmetics, watches and jewelry through tax-free shopping, making visitor spending an important part of sales.

Yoshiharu Nishisaka, executive director of the Japan Department Stores Association, said both sales and visitor numbers from China had fallen by approximately 40%. Chinese tourists previously accounted for more than 50% of duty-free sales at major retailers, explaining why a fall in this market can have a larger effect on those businesses than on national visitor totals.

J. Front Retailing, which owns the Daimaru Matsuzakaya department store chain, expects operating profit to fall 53% compared with a year earlier. Matsuya forecasts an 81% decline. Operating profit is the money a business earns from its regular activities after paying the costs of running them.

Duty-free sales in December fell 16.6% at Daimaru Matsuzakaya and 14.2% at Isetan Mitsukoshi Holdings. Sogo and Seibu began moving social media advertising away from China toward Southeast Asia, Europe and the United States as early as November.

Smaller businesses have also felt the change. A confectionery shop in Takayama, in Gifu Prefecture, reported a 20% drop in sales. Hotels in Kyoto and Kanazawa lowered their rates as demand weakened, echoing the easing of hotel prices observed in other tourist areas.

The Japan Research Institute estimates that spending by Chinese tourists could fall by JPY 1.2 trillion, approximately USD 7.64 billion, over the next year if relations between the two countries continue to deteriorate. That estimate depends on the diplomatic dispute worsening.

Zilmiyah Kamble, senior lecturer in hospitality and tourism management at James Cook University, described the decline in an email as "significant but not catastrophic". She said Chinese travelers are among Japan's most valuable inbound customers because of their spending on retail and luxury goods, while Japan's history of attracting visitors from a range of markets gives it some protection against a shock affecting one country.

South Korea, Taiwan and the United States cushion the fall

South Korean arrivals rose 21.6% in January 2026 to a record 1.18 million. South Korea overtook mainland China as Japan's largest source of overseas visitors, becoming the clearest example of demand growing elsewhere while Chinese arrivals contracted.

Taiwanese arrivals increased 17%. Almost twice as many visitors came from Taiwan as from mainland China in January. American arrivals rose 14%, with increases also recorded from Thailand and Indonesia.

The contrast between the 61% fall in Chinese arrivals and the 4.9% decline in total arrivals shows how much other markets helped limit the damage. Growth elsewhere softened the national downturn, although businesses that depend on Chinese shopping habits still faced a much sharper loss of customers.

David Mann, Mastercard's chief economist for Asia-Pacific, said Japan's total inbound arrivals were running about 34% above levels before the pandemic. Tourism revenue was growing faster than visitor numbers, supported by higher spending per visitor and the weak yen.

Japan's performance therefore has two reference points. January was weaker than the same month a year earlier, but arrivals remained well above the level before the pandemic. Businesses face a slowdown from a record period rather than a return to the much smaller visitor economy that preceded it.

Different visitors are reaching different destinations

Fukushima has become popular with travelers from Taiwan, while golf courses and hot springs in Ehime Prefecture appeal to South Korean visitors. Americans, Australians and Europeans are increasingly drawn to Hiroshima's historical sites.

Those patterns are changing where tourism demand appears within Japan. Chinese visitors commonly concentrated in Tokyo, Kyoto and Osaka, while the growing mix of other markets is bringing travelers to different regions.

Cheryl Ng, a university student from Singapore who visited Hiroshima in February, observed that approximately two-thirds of the visitors at the Hiroshima Peace Memorial Museum were Westerners. She described a visible change in the visitor mix from previous years.

Oxford Economics analysts suggest that the redistribution could ease pressure from excessive tourism in traditional destinations such as Kyoto. Residents there have grown increasingly frustrated with crowded streets and disruptive behavior.

Chinese repeat visitors also matter to destinations outside the best known cities. Some 77.3% of Chinese tourists had made two or more trips to Japan, and these returning travelers favored regional destinations beyond Tokyo. Their absence is therefore noticeable in secondary markets as well as major urban shopping districts.

Japan's regional picture is mixed: some places are gaining visitors from growing markets, while others are losing familiar customers who had already moved beyond a first trip to the largest cities. A change in national totals can conceal quite different experiences for individual towns and businesses.

Airline cuts redirect passengers to Japanese carriers

Chinese airlines have cut flights to Japan and canceled thousands of scheduled services following Beijing's travel advisories. Japanese airlines, however, have recorded an increase in demand on their China routes.

OAG, a British aviation intelligence firm, recorded an increase in Japanese carriers' flights to China from 189 in late October to 203 by mid-January. Budget airlines Peach Aviation and Spring Japan experienced the sharpest increases in passenger numbers.

Business travelers, independent tourists and passengers using Tokyo as a stop on journeys across the Pacific continued to need flights between China and Japan. With Chinese carriers reducing services, Japanese airlines absorbed some of the demand left behind.

Kazuto Suzuki, a professor at the University of Tokyo's Graduate School of Public Policy, explained that passengers were moving to Japanese airlines as Chinese airlines reduced flights. The result was more passengers for the Japanese carriers still serving the market.

The shift was a temporary adjustment rather than a stable arrangement for the longer term, because total capacity between the countries remained well below earlier levels. Individual airlines could carry more passengers even while the wider network offered fewer seats and services.

Flight Master figures for the 2026 Spring Festival travel season showed Thailand reclaiming first place among international departure destinations for Chinese travelers. Flights to Japan fell 43.7% compared with a year earlier.

During the Spring Festival period, 2,376 flights from mainland China to Japan were canceled, representing a cancellation rate of 36%. The figures show how travel demand and airline scheduling shifted during one of China's main holiday periods.

Fewer visits could weaken demand for Japanese brands

Kenta Maruyama, deputy chief researcher at Mitsubishi UFJ Research and Consulting, identified a business effect that extends beyond hotel nights and shopping receipts. Experiences in Japan can encourage travelers to seek Japanese restaurants and products after they return to China.

This "gateway effect" has helped restaurant chains such as Sushiro and Saizeriya establish a presence in China. A holiday can introduce a visitor to food or products that become part of their spending at home.

A prolonged fall in visits could reduce that exposure, weakening the reach of Japanese brands and limiting opportunities for companies to grow in China. The loss would develop more quietly than an immediate fall in department store sales, but would affect the connection between travel and later consumer demand.

The high repeat visit rate among Chinese travelers also gives the tourism relationship depth. Visitors who return several times can build familiarity with Japanese places, businesses and products. Fewer trips would reduce opportunities to maintain those connections.

Businesses prepare for a gradual recovery

Oxford Economics analysts said Chinese visitor numbers were "unlikely to recover anytime soon" in the near term. Japanese businesses are responding by seeking customers elsewhere rather than waiting for the old market mix to return.

Department stores are expanding promotional activity in economies belonging to the Association of Southeast Asian Nations (ASEAN). Retailers are also increasing stocks of products popular with European, American and Southeast Asian customers.

Mastercard's Mann expects any recovery in Chinese travel to be gradual. Kamble said decisions about travel depend on consumer confidence, social media narratives and wider economic conditions as well as politics.

China's economic setting adds to that uncertainty. Its GDP growth target for 2026 is 4.5% to 5%, the lowest target since 1991. GDP measures the value of goods and services produced in an economy, and the target describes the pace of growth the government is seeking.

No date has been given for a recovery in Chinese arrivals. As of March 28, diplomatic tensions showed no signs of easing, leaving the tourism relationship between Asia's two largest economies facing a prolonged period of strain.

Japan's immediate adjustment rests on attracting a broader mix of travelers while businesses reshape advertising, products and prices. The growing markets are already cushioning visitor totals, but retailers, regional destinations and companies that benefit from Chinese familiarity with Japanese brands face distinct challenges.

The Essentials

• Japan received a record 42.7 million international visitors in 2025 before total arrivals fell 4.9% in January 2026.
• Chinese arrivals fell 61% in January after a 45.3% decline in December, amid tensions over Takaichi's Taiwan remarks.
• South Korean arrivals rose 21.6% to a record 1.18 million, while Taiwanese arrivals increased 17% and American arrivals rose 14%.
• Japan's January tourism surplus fell 10.4% to JPY 590.1 billion as Japanese traveler spending abroad rose 51.7%.
• Department stores face steep pressure: J. Front Retailing forecasts a 53% operating profit decline and Matsuya an 81% fall.
• During the Spring Festival period, 2,376 mainland China flights to Japan were canceled, a cancellation rate of 36%.
• JTB forecasts 41.4 million visitors in 2026, down 3% from 2025, while businesses pursue demand from other markets.
• A prolonged decline could also reduce the travel experiences that encourage Chinese consumers to buy Japanese products and visit Japanese restaurant chains at home.