Japan’s outbound demand is still struggling to gain momentum – but inbound is soaring
While outbound travel demand from Japan is trending in the right direction, the growth rate remains low, and recovery to pre-pandemic levels is proving to be an elusive target for Japanese airlines.
Further weakening of the yen is a major factor in dampening overseas leisure travel, executives from All Nippon Airways (ANA) and Japan Airlines (JAL) told Aviation Week Network at the recent IATA annual general meeting in Dubai. This is being partially offset by strong inbound demand, but the outbound weakness is still holding back the overall international demand recovery.
The recovery of the Japanese outbound market has been closely watched over the past few years, as it has not followed the trend in other countries: which was a fast rebound after travel restrictions were lifted.
Other factors are involved in addition to the unfavourable exchange rate. As in many countries, the popularity of domestic tourism in Japan surged in the immediate post-pandemic period, and this trend is likely continuing.
Visa issues still persist in the mainland China market, which is inhibiting Japanese tourism. And for many airlines serving Japan, fleet sizes are still down from pre-pandemic levels.
- Japan Airlines' outbound demand is at 50% of 2019 levels – only 10 points up from the rate a year ago in 2023.
- All Nippon Airways cites 60% recovery for outbound demand versus 2019, although Hawaii peaks have improved.
- Both Japan Airlines and All Nippon Airways have about a 60/40 split in inbound versus outbound traffic.
- The weaker yen has boosted Japan’s inbound tourism, which is running 4% above 2019 levels.
- Japanese tourists to Thailand are at 41.7% of pre-pandemic levels, and at 46.6% for the US market.
JAL experiences gradual increase in outbound travel, although it is still half pre-pandemic levels
Outbound tourism is "slowly, slowly increasing", said Ross Leggett, JAL managing executive officer and senior VP for route marketing. While peak holiday periods have seen relatively robust demand, shoulder and off-peak periods have been weaker.
Tickets sold in Japan are at just over 50% of 2019 levels, Mr Leggett said. This is up from a recovery rate of 40% a year ago in Jun-2023, although the gain of a little over 10 percentage points is not much in this context.
The stronger inbound means JAL's overall international traffic is at 75% of pre-pandemic levels.
Before the COVID pandemic, travellers originating in Japan represented 70%-80% of JAL's international demand. Now the ratio has reversed, and inbound visitors to Japan represent 60% of demand.
Travel between Japan and China is particularly weak, mainly because there has been little progress in easing Chinese visa requirements since the pandemic. Travel in both directions in this market is at about 50% of 2019 levels for JAL, Mr Leggett said.
The ratio of outbound travellers is also low on ANA's international flights, although Hawaii demand is promising
The weak yen is also hindering the recovery of Japanese outbound travel for ANA, said CEO Shinichi Inoue at the IATA event. The share of outbound travellers on ANA's international flights was 37% in the three months through Mar-2024.
Demand for outbound travel from Japan is at just 60% of 2019 levels, ANA estimates. However, Mr Inoue noted that outbound travel has been "steadily recovering", and is up 40% versus the same time last year in 2023. "Travel sentiment is progressing positively" in Japan, he said.
Mr Inoue cites some positive signs for outbound travel.
ANA carried record numbers of passengers to Hawaii during peak periods in 2024, including the new year holiday and "Golden Week" holiday in May-2024.
The airline also expects record passenger volumes to Hawaii this summer. ANA operates three Airbus A380s exclusively on Hawaii routes.
Like JAL, ANA is experiencing strong inbound flows to Japan, which are helping make up for the weaker outbound market. Inbound visitors to Japan are already above 2019 levels, and tourist numbers exceeded three million in Apr-2024 - the highest-ever level for that month.
Visitor numbers from North America and Asia have been soaring, and spending by overseas tourists while in Japan increased by 10% in 2023 versus pre-pandemic levels.
During the immediate post-pandemic period ANA focused on transit traffic between Asia and North America via Tokyo, Mr Inoue said. But now, as Japanese demand recovers, the airline has shifted its focus to point-to-point travel to and from Japan. This boosts the airline's yield.
Data confirms Japanese that travel to key international markets is subdued, but inbound tourism is actually above 2019 levels
The chart below shows Thailand's tourist numbers from Japan. Although the total for Apr-2024 is up by 37.8% year-on-year, it is still just 41.7% of the total from the same month in 2019.
Thailand's monthly tourists from Japan, 2019-2024 (excluding 2021 and 2022)
It is a similar story in the US market. Tourists from Japan to the US were up by nearly 42% year-on-year in Mar-2024, but were at 46.6% of the level in the same month in 2019.
This is one of the most important Japanese outbound markets due to the popularity of Hawaiian vacations.
US monthly tourists from Japan, 2019-2024 (excluding 2021 and 2022)
Despite the outbound weakness in many markets, Japan's overall international traffic has recovered more strongly, thanks to the effect of inbound traffic.
The chart below shows that international traffic reached 82.5% of 2019 levels in Mar-2024.
Japan's monthly international traffic, 2019-2024 (excluding 2021 and 2022)
The next chart demonstrates the strength of Japan's inbound tourism.
The country's overall visitor numbers reached 2019 levels in Oct-2023 and Nov-2023, and have been above 2019 levels for most of this year 2024.
For Apr-2024, visitor numbers were up by about 4% from the same month in 2019. The increase versus Apr-2023 is 56%.
Total Japanese visitor arrivals by month, 2019-2024 (excluding 2021 and 2022)
The major issues are now more economic than pandemic-related, although one has flowed straight into the other
To some extent, a slower rebound of Japanese tourists flying internationally was to be expected. This outbound market has historically been slow to recover from industry shocks, relative to other countries.
However, the residual caution about resuming travel after the pandemic has probably largely dissipated. The greater influence now is probably economic, with the low value of the yen, higher cost of living, and rising prices in popular overseas destinations.
Japan's outbound travel flow is still likely to fully recover, although it is uncertain when this will occur. The rate of increase has remained stubbornly slow, and it does not appear likely to return to pre-pandemic levels this northern summer.
In the meantime, one of the main conditions (the exchange rate) that is dampening Japan's outbound travel is also encouraging inbound travel, which is helping boost overall international traffic and capacity.
But the outbound travel recovery remains a crucial missing piece - for the Japanese airlines in particular.