"The Lobby Used to Be So Packed You Could Barely Move. Now It Feels Like a Different Hotel."
At a resort hotel in Fujikawaguchiko, Yamanashi Prefecture, Chinese guests once accounted for 90% of all bookings. During the Lunar New Year, the lobby overflowed with travelers queuing more than an hour to check in. The hotel's general manager told reporters frankly: "The lobby used to be so packed you could barely move. Now it feels like a different hotel." In just the three months from December 2025 through February 2026, the property lost tens of millions of yen in revenue.
The story from one large hotel in central Osaka is even more striking. During last year's Lunar New Year, independent Chinese travelers filled roughly 1,000 rooms; during the same period this year, reservations totaled only 150 — a drop of 85%.
The trigger was a parliamentary statement by Japanese Prime Minister Sanae Takaichi (高市早苗) in November 2025 regarding a Taiwan contingency scenario. China's Ministry of Foreign Affairs promptly issued an advisory discouraging travel to Japan; airlines cut routes; and travel agencies suspended bookings. According to data from the Japan National Tourism Organization (JNTO), Chinese visitor arrivals in December 2025 fell 45.3% year-on-year, and in January 2026 plunged a further 60.7%.
For readers in Taiwan, the tourism fallout from this Sino-Japanese friction extends well beyond a numbers game. It functions as a mirror reflecting the true nature of what analysts call "tourism diplomacy" — and its structural vulnerabilities.
A 1.79 Trillion Yen Gap: The Economic Shock Behind the Numbers
The problem reaches far beyond empty hotel rooms.
Takafumi Kiuchi (木内登英) of the Nomura Research Institute (野村總合研究所) estimates that if Chinese tourists continue to self-restrict travel to Japan for a full year, Japan's nominal GDP would contract by approximately 1.79 trillion yen — equivalent to roughly 0.29% of GDP, or approximately $12 billion at current exchange rates. Should China also impose rare earth export controls, total losses could expand to 4.43 trillion yen (approximately $30 billion), depressing GDP by 0.73%.
To put the scale in concrete terms: Chinese tourists spent approximately 590.1 billion yen (roughly $4 billion) in Japan during the third quarter of 2025 (July through September), accounting for 27.7% of total inbound visitor spending. Combined with Hong Kong visitors, the two markets represented one-third of all inbound consumption. That spending flows into department stores, drugstores, restaurants, hotels, transportation networks, cleaning services, tour bus operators, and souvenir shops — a dense and interdependent economic supply chain.
With that chain disrupted, the damage is emerging across multiple dimensions.
Ginza Mitsukoshi, Shinsaibashi Daimaru: Department Store Duty-Free Sales in Broad Decline
All four of Japan's major department store groups — Isetan Mitsukoshi, Takashimaya, Daimaru Matsuzakaya, and Hankyu Hanshin — recorded year-on-year declines in duty-free sales in December 2025. Duty-free revenues at the Ginza Mitsukoshi store fell 20.1%; total store revenues at Daimaru Shinsaibashi dropped 6.4%; Hankyu's flagship store declined 6.7%.
Takashimaya's figures are more direct: Chinese tourist duty-free spending in December plummeted 35%, while Hankyu Hanshin reported a roughly 40% drop in spending by Chinese customers.
At their peak, Chinese customers accounted for as much as 85% of duty-free sales at some department stores — a figure cited for Daimaru Matsuzakaya in fiscal year 2019. That share has since fallen to around 66%. At Takashimaya, the proportion declined from 77% before the pandemic to 56%. The data suggest that a quiet "de-China-ization" of the department store sector was already underway; the current political rupture has simply accelerated it.
Isetan Mitsukoshi Holdings responded with relative composure, noting that the Chinese share of its duty-free revenues "is not so dominant that the figures are cause for pessimism." Takashimaya President Yoshiro Murata (村田善郎) indicated plans to leverage the company's VIP customer networks at its overseas stores in Southeast Asia — effectively channeling high-value clients from Singapore and elsewhere toward Japan.
The Hardest Hit: Chinese-Operated Vacation Rentals
The impact on mainstream hotel operators has proved more limited than many anticipated. A ryokan operator in Arashiyama, Kyoto, told the Nikkei: "Even when a booking is canceled the day before, a new reservation comes in almost immediately — there's been virtually no effect." A February survey by the Kyoto Chamber of Commerce and Industry similarly found that 67% of tourism operators reported "almost no impact" during the Lunar New Year period, as visitors from other countries and domestic Japanese travelers absorbed the slack.
The genuine distress is concentrated in two categories of operator.
The first is the vacation rental (minpaku) sector operated in Japan by Chinese nationals. A hotel manager in the Kinki region told reporters that these properties draw almost exclusively Chinese guests, process transactions through Chinese digital payment platforms, and channel funds largely outside Japan's mainstream financial system. When the flow from China stops, the pipeline goes dry instantly. Lin Chuanlong (林傳龍), who manages approximately 80 minpaku units in Nishinariku, Osaka, told Bloomberg that friends in real estate and travel "are all in trouble." More than 600 groups — totaling upward of 1,000 guests — canceled their bookings through year-end.
The second category is Chinese travel agencies. Because Japanese operators enforce cancellation penalty clauses strictly, Chinese companies must pay contractual fees to Japanese hotels, making them the most direct economic casualties of this diplomatic standoff.
Kyoto Hotel Prices in Freefall: "Unprecedented Discounting"
Kyoto hotels are engaged in what staff describe as "unprecedented price-cutting." Properties that previously charged between 12,000 and 14,000 yen per night (approximately $80 to $95) have reduced rates to 8,000 to 9,000 yen (approximately $54 to $61). A hotel employee speaking to NTV's News Zero program acknowledged the bind candidly: "Frankly, we want to charge more, but we have no choice but to lower prices to attract domestic guests. This is a scale of discounting we've never seen before, and it's deeply frustrating."
Other operators were more blunt: "Competition on price is intensifying." "We've been forced down to 3,000 yen a night." "This time last year we were fully booked; this year we still have vacancies."
A Japanese traveler posting on social media noted wryly: "I can finally book a reasonably priced hotel in Kyoto." For operators, however, the discounts represent survival at the cost of profitability.
Kansai TV Field Survey: "Only One in Ten Businesses Reported a Revenue Drop"
The hotel pricing data looks alarming. But does it accurately represent conditions on the ground? （Related： ‘No Contract for 30 Years’: NVIDIA’s Jensen Huang Reveals Trust-Based Ties With TSMC ｜ Latest ）
A segment broadcast on Kansai TV's News Runner on December 5, 2025 offered a more nuanced picture. Reporter Reona Hata (秦令歐奈) visited 20 businesses across Shinsaibashi in Osaka and central Kyoto to assess the direct impact of reduced Chinese visitor numbers. The finding: only two of the 20 — roughly 10% — reported a significant decline in revenues.
A takoyaki (octopus ball) vendor in Shinsaibashi noted that while Chinese customers had fallen by more than half, "Korean tourists have increased, so it hasn't been a major blow." The manager of popular rice ball shop Onigiri Gorichan (おにぎりごりちゃん), Tsubasa Tanigawa (谷川翼), said: "We're grateful to always be full — revenue hasn't been affected. But restaurants that specifically targeted Chinese customers will have a hard time going forward." A spokesperson for Kyoto's well-known blotting paper brand Yojiya (よーじや), Sarara Higashi (東紗良), acknowledged that Chinese customers had been big spenders — sometimes thousands of yen per visit — but noted that domestic Japanese visitors increased during the autumn foliage season, and "revenue is actually in positive growth."
Not every business escaped unscathed. A kimono rental shop owner in Kyoto described losing roughly 3 million yen (approximately NT$640,000) in monthly revenue, with Chinese customers having previously accounted for half of all clients. "I don't know what I'll do tomorrow," he said.
Professor Satoshi Fujii (藤井聡) of Kyoto University's Graduate School, invited to analyze the findings on air, offered a pointed structural observation: "If nine out of twenty businesses say there's no impact, it means the previous state was one of overtourism. Once Chinese visitors stopped coming, the customers who couldn't get in before filled those seats. Of course business hasn't changed."
In other words, the decline in Chinese visitors has not caused Kansai tourism to "collapse." It has instead inadvertently revealed a structural reality: in the most congested tourist zones, demand had long exceeded supply capacity. Remove one piece of the puzzle, and other pieces quickly fill the gap. The businesses that have been genuinely struck are those that had concentrated almost their entire commercial model on the Chinese market.
A Quiet Lunar New Year in Dazaifu, Fukuoka: "Voice Is Fine — Not My Face. These Are Abnormal Times."
Moving to Kyushu: reporters from Television Nishinippon Corporation (TNC) visited Dazaifu Tenmangu shrine in Fukuoka Prefecture. The approach path remained busy, but vendor observations were consistent — Taiwanese and Korean visitors were visible; mainland Chinese tourists were not. A shop selling umbrellas noted that Chinese cruise ship passengers had previously been a major source of business, and that even aboard ships, Korean passengers now outnumber Chinese ones. （Related： ‘No Contract for 30 Years’: NVIDIA’s Jensen Huang Reveals Trust-Based Ties With TSMC ｜ Latest ）
Reporters sought out several Chinese visitors for street interviews. One agreed to speak on camera but set a notable condition: "Voice is fine — not my face. These are abnormal times." That remark may convey more than any dataset about the psychological state of many Chinese travelers: willing to visit Japan, but unwilling to be seen doing so.
Another Chinese visitor was more philosophical: "National policy questions like this — ordinary people like us just focus on our own lives." Others, upon hearing the phrase "Japan-China relations," fell silent and walked away without responding.
The most affecting scene came at a Fukuoka travel agency that specialized in Chinese group tours. Yoshie Takao (高尾淑江), representative of the Sino-Japanese Friendship Travel Agency (日中友好旅行社), opened her February booking ledger to reveal almost nothing. "Look at this — there's really no work. It's painful. No work means no income. I'm in serious difficulty." The situation had persisted for approximately three months. She had sustained herself by taking freelance shifts at a friend's agency — until, she said with evident relief, a new April booking finally came in: "I want to put together an even more carefully crafted itinerary than before. I hope group travel recovers after April."
The Same Storm — Why Are Some Businesses Unaffected While Others Face Closure?
Kansai TV's survey of 20 businesses found 90% unaffected; the Kyoto Chamber of Commerce survey found 67% reporting "almost no impact" during the Lunar New Year. Yet the Fujikawaguchiko hotel describes revenues as "devastated," the Fukuoka travel agency recorded three months of zero business, and an Osaka minpaku operator lost reservations for more than 1,000 guests.
The same reduction in Chinese visitors — vastly different outcomes. The explanation lies in five structural factors.
First: The "Concentration" of a Customer Base Determines Its Vulnerability.
Ninety% of the Fujikawaguchiko hotel's guests were Chinese; the Fukuoka travel agency's business was 100% Chinese group tours. For these operators, Chinese visitors were effectively the only market. By contrast, a takoyaki stand or a blotting paper boutique in Osaka or Kyoto served Chinese customers as one segment among many — Korean, Southeast Asian, European, and American visitors could and did substitute. This is the fundamental difference between diversified risk and concentrated exposure.
Second: Group Tours and Independent Travelers Are Fundamentally Different Markets.
The Chinese government's travel advisory struck group tourism most directly. Agencies were instructed to halt bookings; airlines cut capacity; Chinese operators absorbed cancellation penalties. But by 2025, group travel accounted for only approximately 11% of Chinese visitors to Japan — nine in ten were independent travelers. Those individuals require no agency, no guided itinerary, and no group charter. A government directive can constrain travel agencies; it cannot easily constrain individual decision-making.
Third: The "Closure" of a Consumption Ecosystem Is Critical.
Chinese-operated minpaku in Japan drew almost exclusively Chinese guests and processed transactions through WeChat Pay or Alipay — a financial circuit that largely bypassed Japan's banking system. This was a closed loop: when China turned off the tap, the entire pipeline ran dry. Mainstream hotels operating through international platforms such as Booking.com or Agoda have inherently diversified demand; a Chinese cancellation one afternoon can be replaced by an Australian family booking that evening.
Fourth: Geographic Location Determines Substitution Elasticity.
Kyoto, Osaka, and Tokyo are global tourist destinations by default. When Chinese visitors retreat, travelers from other countries fill available capacity relatively quickly. Secondary and tertiary attractions such as Fujikawaguchiko or Gamagori in Aichi Prefecture, which historically relied on Chinese travel agencies to channel visitors to them, lack the independent capacity to attract alternative international demand. Substitute visitors do not appear automatically.
Fifth: The "Replaceability" of What Is Being Sold Varies Enormously.
Takoyaki, rice balls, and blotting paper sell to any nationality. A kimono rental experience, however, draws its clientele overwhelmingly from Chinese women travelers — a customer cohort whose enthusiasm for "Kyoto kimono photo sessions," amplified through the Chinese social platform RED (Xiaohongshu), drove an entire micro-industry. When that cohort disappears, no comparable volume of demand from other nationalities materializes to replace it.
This episode functions as a stress test of Japan's tourism sector. Businesses with diversified customer bases, international booking platform access, and locations in top-tier tourist cities have been largely insulated. Those deeply embedded in the Chinese market, dependent on group tour pipelines, and operating within closed payment ecosystems have, in effect, lost their entire business model overnight.
The real question is just one: Can your business model survive any single market suddenly disappearing?
An Unexpected Easing of "Overtourism"? The Complex Feelings of Kyoto Residents
The decline in Chinese visitors has produced a secondary effect that some observers find complicated to assess.
Reporters in Kyoto noted that Mandarin, once a constant ambient presence in the city's subway system, has gone quiet. Kiyamachi Street and the Arashiyama bamboo grove — both previously overwhelmed by crowds — have seen noticeably reduced congestion. Visitors from Southeast Asia and Europe have become relatively more visible, and their consumption patterns are typically more spatially dispersed and temporally extended.
Japanese social media has featured a stream of commentary suggesting that "the overtourism problem has been solved." But analysts at Toyo Keizai characterize this framing as emotionally driven rather than analytically sound. In 2024, domestic Japanese tourism accounted for 540 million trips, while inbound foreign visitors totaled 36.87 million — less than 6.4% of the aggregate. The primary driver of overtourism has consistently been the concentration of domestic Japanese travel during weekends and national holidays. Foreign visitors, distributed more evenly across the calendar year, have generally contributed to demand smoothing rather than congestion.
Those Who Came Anyway: Japan's "True Enthusiasts" Are Redrawing the Tourism Map
Despite the broad retreat, a distinct cohort of Chinese travelers has moved against the trend.
A man in his twenties from Beijing, speaking to the Mainichi Shimbun, said: "Politics is politics. Japan has appeal that no other country has." This cohort skews young and experienced — repeat independent travelers who are no longer primarily interested in shopping on Ginza. Tohoku, Hokuriku, and regional Kyushu cities have become new focal points, and "experiential consumption" has replaced the high-volume retail purchases once associated with Chinese tourism in Japan.
This structural shift predates the current political confrontation. Group tours accounted for 42.9% of Chinese visitors to Japan in 2015; by the second quarter of 2025, that share had fallen to 11%. Today's Chinese independent travelers research itineraries on RED (Xiaohongshu), seek out ryokan with traditional multi-course dinner-and-breakfast packages, attend local festivals, and pursue specific ramen shops tucked into alleyways.
Chinese visitor spending is also undergoing what some retail analysts describe as "downgrading." In South Korea, although Chinese visitor numbers had recovered to approximately 90% of pre-pandemic levels by 2025, duty-free store revenues remained depressed, as budget retailers displaced luxury brands as preferred destinations. Japan is exhibiting similar patterns: department store counters have grown quiet, while drugstores and discount retailers have proved relatively resilient.
Implications for Taiwan: When Tourism Becomes a Geopolitical Instrument
Taiwanese readers will find this scenario familiar. Following the Democratic Progressive Party's return to power in 2016, mainland Chinese visitor arrivals in Taiwan dropped sharply from 4.18 million the previous year, delivering severe blows to tourism-dependent destinations including Kenting, Sun Moon Lake, and Alishan. What Japan is experiencing today, Taiwan navigated nearly a decade ago.
The shared lesson across both cases is clear: excessive concentration of a tourism sector's customer base within a single national market constitutes a systemic risk — one that political developments can activate rapidly and with little warning.
Beneath the headline figures, however, a more structurally significant shift may be underway. The young Chinese travelers who continue to visit Japan despite political tensions — those who pursue experiential, immersive travel regardless of bilateral friction — represent precisely the tourist profile that Taiwan's own tourism authorities have long sought to attract. As Chinese visitors migrate from Ginza to regional towns in Tohoku, and from group shopping tours to individual deep-experience travel, the pattern is not merely a Japan-specific story. It reflects a broader structural transformation of the East Asian tourism market — one whose implications extend well beyond any single diplomatic episode.
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