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This year, Japan has become a hot tourist destination. International tourists, drawn to the country by the cheap currency, reached a historic high in March. Last month, the Japanese yen fell to its lowest level in 34 years against the dollar. But local airline stocks aren’t enjoying the boom.
A record 3.1 million tourists visited in March, and the rebound in travel has pushed tourism spending this year to a record quarterly high, helping the Japanese government set a target for annual tourism spending by 2030. This is helping us move closer to our goal of 15 trillion yen ($96 billion). Airline, international cargo and airmail demand is beginning to recover, and the weaker yen is further boosting foreign currency sales profits.
Japan Airlines expects sales to rise 17% in the year to March next year and group net profit to rise 5% to 100 billion yen. This is the first time JAL has reached this level since 2018. The company is working to expand the group’s overall international capabilities, with North America as one of its focus areas. However, the country’s airline stocks do not reflect this positive outlook.
Shares in Japan’s two biggest companies, JAL and All Nippon Airways, have barely moved over the past year while the broader benchmark Nikkei 225 index has risen by more than a third.
One reason for this is that the weak yen is a double-edged sword. The price of imported fuel, paid in dollars, is rising. But the bigger problem is the slump in international travel. Unlike other parts of the world, Japanese travelers have been slow to recover after the pandemic. In the first quarter of this year, the number of Japanese travelers leaving Japan fell by nearly 40 percent compared to pre-pandemic levels, even as the number of foreign visitors to Japan soared.
Travel to Hawaii, a popular destination before the pandemic with Japanese travelers making up the largest number of international travelers, has long been a good indicator of demand for long-haul flights. The fact that the number of Japanese visitors to Hawaii this year is about half of 2019 levels is alarming, given that long-haul flights are a major driver of airline profitability.
All of this means that a full recovery in airline revenues and stock prices will depend on more factors than a recovery in tourism: wage growth above inflation, a recovery in household spending, and stability in the yen. means.
june.yoon@ft.com
