Japan’s tourism sector in 2025 presents a paradoxical picture: a record-breaking surge in international visitors driving overall numbers, while the domestic travel market simultaneously shrinks. This widening gap signals a silent polarization in Japan’s approach to travel and hospitality.
Inbound Boom: Quantity over Quality
The number of foreign visitors has surpassed 30 million at the fastest pace ever, reaching 31.6 million by September 2025, with cumulative consumption hitting a record ¥6.9 trillion.
However, this growth is increasingly volume-driven:
- Slowing Per-Capita Spending: The average expenditure per tourist fell to ¥219,000 in the July-September period. Luxury purchases have subsided, with growth being sustained by high-volume sales of consumable items (e.g., cosmetics).
- The Challenge: The current trajectory relies heavily on increasing headcount. To meet the goal of high-value tourism, Japan must strategically shift from mere visitor quantity to enhancing the quality of spending through longer stays and rich, regional experiences.
Domestic Exodus: The Cost of Overtourism and Inflation
The influx of foreign tourists, combined with high operational costs, is pushing Japanese travelers out of the market.
- Widespread Decline: From January to July 2025, overnight stays by Japanese travelers fell by 4%, with 35 out of 47 prefectures reporting a year-on-year decline.
- Impact on Major Cities: Areas of severe congestion saw the steepest losses. Kyoto Prefecture fell 14.9% and Tokyo fell 13.9% in Japanese overnight guests, demonstrating locals’ avoidance of crowded spots.
- Demand Shift: Domestic demand is fragmenting. Japanese consumers are increasingly redirecting their travel budget toward either recovering overseas travel or high cost-performance digital content consumption (e.g., streaming), which offers better value than high-priced, congested domestic trips.
Strategic Imperatives for the Future
The current path risks making Japan’s key tourist destinations a primary domain for foreign visitors, alienating local travelers. Future strategy must address this imbalance:
- Rebuild Domestic Value: Regions must actively analyze traveler data to identify optimal times and unique offerings, providing a compelling value proposition that justifies domestic travel costs and competes with international options.
- Prioritize Experience: Focus must shift from maximizing visitor numbers to maximizing per-capita value through immersive, dispersed, and sustainable tourism that benefits local communities.