Japan mulls imposition of new tax to combat overtourism

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Japan may currently be the leading destination of choice for most of the world, but overtourism is significantly impacting the country in an adverse manner.

Locals feel that foreign arrivals are encroaching on their way of life, often treating traditional items or cultural icons in a disrespectful manner.

While tourism has proven a boon to the national economy, locals have balked at the way the prices of basic commodities such as food have risen to cash in on foreign trade.

As a result, citizens have called upon the national government to take necessary measures to mitigate the overall impact of overtourism on the country.

In the first place, how did Japan end up with overtourism?

In a report published in June of last year, global auditing firm Ernst & Young (EY) pointed out that inbound tourism has been playing an increasingly vital role in terms of supporting the Japanese national economy.

In Q4-2024, foreign spending in the country hit a total of around JPY7.2 trillion, pushing inbound tourism up the scale as Japan’s second largest export sector.

EY analysts stated: “The recent growth in inbound spending is driven not only by higher spending per trip, but also by a surge in the number of foreign tourists to Japan.” 

The Japan Tourism Agency (JTA) also reported that the number of foreigners visiting Japan hit a record three million in March 2024 alone, and the total has remained high ever since.

However, EY analysts pointed out that, while the recent surge in tourist numbers has been welcomed by many locals, the same phenomenon began to be perceived as overtourism when the local way of life was impacted by the deterioration in public services and a sudden surge in terms of inflation.

As a result, the EY report added: “Any attempt to enhance economic growth through tourism can be a double-edged sword. Sometimes it has a negative effect on local communities unless a proper tourism management system is in place. Local stakeholders should feel a sense of ownership to address the challenges of overtourism.”

Ongoing talks

As of Monday, 3rd March, the Japanese government began consultations on whether or not to significantly increase its current exit tax for foreign travellers departing from the country.

Currently, Japan charges a US$6.64 tax per individual; but administration officials are prepared to raise it as high as US$33.20 if studies show that it can effectively deter overtourism.

In fact, officials pointed out that revenues earned from the imposition of a higher tax will be used to mitigate the impact of overtourism on citizens.

Surprisingly, Japan’s travel sector itself is currently rallying against the imposition of a much higher exit tax which would essentially be five times the current amount.

Travel professionals throughout the country have also called out the way government agencies have been approaching the issue in a piecemeal manner that has mostly been ineffective.

As British travel marketing analyst Ashley Harvey puts it: “Simply charging more and making promises is not enough. If nothing is done, then the problems associated with overtourism are only going to get worse.”

No impact at all

EY analysts have echoed Harvey’s sentiments, pointing out: “Imposing tourist taxes seems less likely to eliminate the public dissatisfaction caused by overtourism. It may be effective to some extent in discouraging tourists from visiting tourist spots, but the collection of tourist tax should be discussed in the context of raising funds for marketing activities or initiatives to address tourism issues, rather than as the solution to alleviate the frustrations of local residents.”

Indeed, while tourist tax revenues may support administrative efforts to maintain and improve residents’ quality of life through campaigns boosting awareness on local tourism ordinances or pushing for the development of related infrastructure, raising taxes will virtually do nothing for the deteriorating way of life in areas worst hit by overtourism.

Experts likewise warn that frustrations among locals are rising, given how the rising cost of living is threatening daily life.

What happens now?

Admittedly, the bulk of Japanese citizens may not feel the economic benefits of inbound tourism under a system that is designed to only drive profits to certain businesses. 

For Japan to ensure that all stakeholders enjoy the financial benefits of tourism, it needs to rethink its current organisational and operational systems within the sector.

In which case, analysts propose the formation of a dedicated destination management organisation (DMO) to lead the management of the sector.

The effectiveness of having DMOs in place has already been seen in some nations that are now recovering from the effects of overtourism as these organisations have guided the industry to a healthier way of operating without encroaching on their nations’ resources and culture.

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