More Tourists Are Visiting Japan — and Bringing Their Wallets With Them
Japan’s economy continues to decelerate, despite Prime Minister Shinzo Abe’s ambitious economic reform agenda, historically low interest rates and unprecedented central bank stimulus measures. Financial turmoil in China has made matters worse, and it will be difficult for Japan to mount a sustained recovery without some stabilization in its largest trading partner.
Investor expectations are high for additional quantitative easing (QE) from the Bank of Japan (BoJ). That should further weaken the yen and provide a boost to exports. Every month, the BoJ is buying ¥6 trillion to ¥8 trillion of assets in a bid to boost inflation. It is by far the largest QE program in the world as a percent of GDP.
Other opportunities are emerging among certain sectors of the economy, particularly tourism and retailing. The government recently loosened visa restrictions for those wishing to visit Japan — a move that has resulted in a flood of new tourists and an increase in retail purchases by foreign visitors. Despite China’s slowdown, the largest influx of tourism is coming from China.
Tourism is expected to boost Japan’s GDP growth rate by as much as 0.4 percentage points. Japan is on target to reach 20 million visitors a year by 2020. Currently, tourists spend about ¥2.6 trillion ($21 billion) a year on hotels, shopping and other travel-related expenses. Select companies in the hospitality and retail industries, like discount retailer Don Quijote, cosmetics and diaper maker Kao and personal care products maker Shiseido, may benefit as this trend continues.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses or the collective investment trust's Characteristics statement, which can be obtained from a financial professional, Capital or your relationship manager, and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.