Tourism's impact on Japan’s economic growth may weaken as yen strengthens: CNBC

In recent years, Japan has become one of the hottest travel destinations, owing to cheap entertainment, transportation and accommodation. This has resulted in the resurgence of the Japanese economy. However, as the yen strengthens, the impact of the tourism industry on the country's GDP growth may start to wane, CNBC says.

Inbound tourism contributed 0.4 percentage points to Japan’s 0.1% annual GDP growth last year. In addition, annual spending by foreign visitors to Japan in 2024 reached a record high of 8.1 trillion yen (54.5 billion dollars), Mastercard Institute of Economics reports.

Meanwhile, rising inflation prompted the country's central bank to raise the interest rate. This, in turn, caused the yen to strengthen against the US dollar. However, a slowdown in tourism does not necessarily mean that Japan's GDP growth will go down, David Mann of Mastercard believes. He expects domestic consumption to pick up, given the strong labor market and rising wages.