On November 14, the Chinese government issued an advisory to its citizens to exercise caution regarding travel to Japan. This was triggered by Prime Minister Takaichi’s remarks on “situations bordering on a threat to national survival,” but since this is not a forum for discussing national security, I will not delve into that. Rather, I believe this situation forces us to recognize once again the precariousness of relying on the export of goods and services for economic growth. Just as I argued during the implementation of the Trump tariffs that we must end our dependence on the U.S., we must also end our dependence on China.
Of course, halting all trade with the U.S. and China is not a realistic option. However, the current state of Japan is this: while Japanese citizens lament that they cannot afford to stay in domestic hotels or can only manage to buy minicars (kei cars), the nation sits on a mountain of foreign currency it cannot even use up. Yet, we continue to diligently serve our goods and services to foreigners at bargain prices, pleading, “Please give us more foreign currency.” What do we intend to do with even more accumulated foreign reserves? In the end, a full-scale economic expansion for Japan as a whole, led by inbound tourism or the automotive industry, never seems to materialize. Doesn’t something seem wrong to you? Yes—it is the macroeconomic policy that is flawed.
It is not impossible for a lead in the export of goods and services to increase employment and capital investment, thereby linking to overall economic expansion. I saw this pattern frequently in the emerging economies I once specialized in. However, the absolute prerequisite for this is that the government does not obstruct the expansion of domestic demand through austerity. Our government has done exactly that—obstructing growth through tax hikes, the degradation of social security, and the scaling back of public investment and subsidies. Stopping these obstructions should naturally be a part of the fiscal expansionism championed by the Takaichi administration.
In Japan’s case, we have an abundance of foreign currency, so there is no need to wait for an export-led recovery in the first place. Whether it is automobiles or travel services, the supply capacity exists domestically. We should simply increase the money in the pockets of Japanese citizens and have them buy these things preferentially. It’s as simple as that. It is an abnormal state of affairs when people cannot afford domestic trips due to soaring prices or have to give up on school trips to Kyoto. Incidentally, I personally believe this idea of “just increasing the money” applies to other sectors as well, particularly the relationship between medical fields and health insurance, but I will save that discussion for another occasion.
Furthermore, inbound tourism is fundamentally a low-tech industry. No matter how much the number of visitors increases, it is unlikely to lead to significant technological innovation. In other words, its contribution to economic growth naturally has its limits.
Further expansion of inbound tourism has little merit, and promotion policies should be halted immediately. While inducing a stronger yen through interest rate hikes is a mistaken policy, other measures—such as the full reinstatement of visa requirements—should be considered.
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