Japan Travel

* * * * * * * * TERRIE’S (TOURISM) TAKE – BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie
Lloyd, a long-term technology and media entrepreneur living in Japan.

Tourism Sector Edition Sunday, July 26, 2015, Issue No. 814

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+++ Will the Inbound Tourism Boom Continue?

One of the questions I’m most frequently asked by foreign investors
(real estate investors in particular), is whether the current rise in
foreign tourist numbers in Japan can continue. It is true that in the
last four years, the number of tourists entering the country has risen
at a torrid pace, literally doubling in that period. Indeed, for the
first time in 44 years, in the first half of 2015 there were more
inbound tourists than Japanese going overseas. The forecast for inbound
tourists for 2015 is now around 18m, so indeed this pace of growth is
going to be hard to top.

However, perhaps those investors are asking the wrong question. A more
appropriate one would be, “Will there be sufficient extra tourists over
the next few years that my real estate investment will make me money?”
To this question, my answer is a strong “Yes!” The reason is that with
Japan receiving this many inbound tourists, its existing hotels and
tourist-serving infrastructure is pretty much maxed out, and supporting
even a modest further increase is going to need a lot more significant
investment than has been the case so far. Therefore, you don’t need
another 18m in the next five years to create an ongoing favorable
investment climate. You really only need the current numbers plus a
little bit of alpha.

Our guess is that Japan will go on to attract more than the target 20m
inbound travelers by 2020. In fact, we wouldn’t be surprised if we
experience an influx of more like 25m+ by 2020. Why? Because as has been
demonstrated amply in the last three years, the Japanese government is
able to turn on the tourist inflow spigots through some relatively
simple steps, such as easier visas, ongoing cheap yen, and tax
givebacks. There are still plenty of countries near Japan whose citizens
don’t have easy access to travel here although they’d come if they could
— think China, Vietnam, Philippines, and everywhere in Asia west of
Thailand. OK, yes, in the last couple of months there have been some
easing for China, Vietnam, and the Philippines, but there is still
plenty of distance to go.

Furthermore, there are also plenty of tax gimmicks available to
lawmakers as well, as they help Japan become the new shopping mecca for
Asia, just as Hong Kong and Singapore used to be before they got too

[Continued below…]

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As most readers will no doubt know, on October 1st, 2014, Japan extended
its consumption tax-free program for tourists to include food, medicine,
and cosmetics. This last category was a smart move, because cosmetics by
value and volume is one of the biggest purchase segments for inbound
foreign tourists. Actually, the whole tax scheme itself is quite smart.
If you want to buy consumables (food, cosmetics, etc.) you have to spend
in total more than JPY5,000 and less than JPY500,000 all on the same
day. If non-consumables (appliances, apparel, etc.) then more than
JPY10,000 on the same day. This prompts tourists to go on spending
sprees to go over the minimum limit, and to do all their buying at the
same time. If there is one thing the Japanese understand, it’s the
dynamics of herd instinct.

What isn’t smart about the new system is that it’s painful for the
stores registering for tax-free status and processing the purchasers’
paperwork. Lines of tired tourists waiting for harried shop assistants
to complete too many unnecessary forms created by bureaucrats unable to
think of IT and automation has meant a bumpy start for the program. It
has caused most smaller stores to put off registering as tax-free
outlets, and for big ones to find themselves with a double-edged sword
— dramatically increased sales tempered with extra manpower and
reporting costs as well.

Luckily, while the bureaucrats have been clueless about the human
traffic jams they are causing, Japan’s savvy retailers have stepped in
and are trying to make things easier. Take the Seven-Eleven convenience
store chain for example. The company decided to streamline the
cumbersome tax counter process by setting up special tax counters and
using some IT. Now customers can simply show their passports and sign a
slip when buying tax-free. OK, the transaction time including bagging
(in special tamper-proof bags) still takes about five minutes, but this
is a third of the time it used to take. Furthermore, since the average
sales of tax-free products is about 10% of their average store sales,
the extra effort is clearly worth it.

Elsewhere around the nation such as in smaller cities, groups of shops
are nominating a single, central store, usually the local department
store, to act as the tax counter, and tourists are directed there to get
a refund on their purchases. While the implementation of this idea
hasn’t been smooth or universally popular, it has nonetheless resulted
in the number of stores around the nation offering tax-free shopping to
increase to about 18,779 — double that of last year and 400% more than
in 2012.

Personally I wonder why the government doesn’t just bite the bullet and
get rid of all the cumbersome paperwork. This could be achieved by
having people register their passports BEFORE they arrive in Japan, then
downloading an application to their smartphones that contains a personal
photo, the passport details, and a unique shopper number. Those
travelers not having smartphones could still stick to the paper system.
Such an application, whether connected by WiFi or not, could generate a
unique code to be scanned by the retailer’s POS system, producing all
the spending and tax data a bureaucrat could ever need, with nary a
piece of paper in sight.

The other thing they need to do away with is the tamper-proof bag
system. While I understand that they want to restrict purchases to
genuine tourists and not have leakage of tax-free goods to the local
population, I think it is an unnecessary requirement that is severely
hindering what could otherwise be a very successful tourist draw card in
the future. Firstly, having to use special bags and sealing is beyond
smaller retailers, so until the government licenses someone to resell
them, it’s a hurdle. Secondly, as the South Koreans have already proven
with their own tax-free system and lack of need for such bags, most
foreign tourists do not have a strong personal network in-country and
therefore are unlikely to “leak” tax-free goods to citizens. Yes, there
could be some black market activity, but it is likely to be negligible
because most tourists don’t want to wind up in a Japanese jail. Instead,
those intent on breaking the law will simply create fake bags and tax slips.

Instead, on the upside, if Japan was to let its visitors open their
purchases while still at their hotel, the women (OK, and many guys)
might like their new cosmetics so much that they will go back and buy

…The information janitors/

——- Bilingual Senior Software Developer Vacancy ——-

MetroWorks KK, the creator of the ACQ structured crowdsourcing software
that powers www.japantravel.com, has a vacancy for a highly experienced
senior software developer for its Tokyo-based team. The successful
individual will have significant experience developing complex web
systems, including architecting, design, coding, content team
collaboration, and general team management. We use an Agile approach and
our code is mostly written in PHP Zend, some Java, MySQL, and Mongo. We
use many other services (web, iOS/Android mobile, etc.) and platforms as
well, with various members of the team being experts on each.

Ideally the applicant will have a minimum 5 years experience in
developing web systems. Any nationality, as a visa can be supplied to
the qualified individual, however, English and Japanese capability is
desirable. Competitive salary with additional increases as capability
and team leadership skills are established. Great team, friendly
atmosphere, modern office in convenient location in Roppongi. Immediate
start, but we will wait for the right person.

Interested applicants please send your resume to info@metroworks.co.jp
or to info@japantravel.com.


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Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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