Impact of China-Japan Tensions on Tourism and Japanese Retail Sector, Everything You Need to Know

Published on January 7, 2026

Against the backdrop of rising tensions between China and Japan, tourism is emerging as one of the most affected areas. With the downturn in diplomatic ties since November 2025, economic sanctions have been placed by China on Japan in quick succession. These are focused on Japanese seafood, reduced cultural exchange, and reduced travel activities, among others. Some of the most affected businesses in Japan are in the area of retail, tourism, and hotel services, since the Chinese tourists who used to come to Japan in high numbers constituted the most profitable sector in these areas. It is in these areas that this article explores the effects the rift between the two countries is having in Japan’s travel sector.

Chinese Tourists: A Pillar of Japan’s Tourism Industry
Before the rise of political tensions, Chinese tourists were an essential part of Japan’s tourism economy. Under the leadership of former Prime Minister Shinzo Abe, Japan pursued policies to attract international tourists, including relaxing visa requirements for Chinese citizens. As a result, inbound tourism surged, with nearly 32 million foreign visitors in 2019. Chinese nationals, in particular, became key contributors to this growth, with over 7 million Chinese visitors in 2024 alone, spending ¥1.7 trillion JPY (approximately $11 billion USD).

This influx of tourists significantly boosted Japan’s economy, especially in the retail and hospitality sectors. Chinese visitors were known for spending more than the average foreign tourist, particularly in shopping areas, luxury goods markets, and sightseeing spots. For instance, in the third quarter of 2025, Chinese tourists spent an average of $1,622 per person, representing 24% of the total foreign tourist spending in Japan. Their contributions accounted for nearly a third of Japan’s inbound consumption, making their presence in the country highly valued.

The Downturn: Flight Cancellations and Declining Visitors
By the end of December 2025, Japan’s tourism industry experienced a significant blow as around 30% of the planned 1.44 million Chinese trips to Japan were canceled. Several Chinese airlines, including major carriers, offered full refunds or free cancellations for flights to Japan, further reflecting the drop in interest. Chinese airlines alone reported around 491,000 cancellations of Japan-bound flights by mid-November 2025. The ongoing dispute has made Chinese travelers hesitant to visit, leading to a dramatic reduction in tourist arrivals.

These cancellations have led to estimates suggesting that the Japanese economy could lose up to ¥1.49 trillion ($9.59 billion) over the next year, with potential losses ranging between $500 million and $1.2 billion by the end of 2026. The tourism sector, which had heavily relied on high-spending Chinese tourists, is facing its toughest challenge in years. Meanwhile, reports from China have cited a rise in sinophobic attacks and crime as additional factors discouraging Chinese travelers from visiting Japan.

The Mixed Reaction from the Japanese Public
While the loss of Chinese tourists has hit Japanese businesses hard, the general public’s reaction to the drop in Chinese visitors has been mixed. For some, the crowded streets and rising costs associated with an influx of Chinese tourists had become increasingly unwelcome. In certain areas of Japan, complaints about overcrowded shopping districts and the behavior of some tourists had stirred xenophobic sentiments, making the decline in Chinese visitors seem like a welcome relief.

However, for Japanese businesses, especially those in the retail and hospitality industries, the loss of affluent Chinese tourists is a significant setback. Iconic shopping areas like Osaka’s Dotonbori and Tokyo’s Ginza, which had once flourished thanks to Chinese spending, are now seeing declines in revenue and foot traffic. Large department stores and duty-free shops in airport terminals are particularly vulnerable to the ongoing downturn.

Japan’s Struggle to Fill the Gap: Can Alternatives Compensate for the Loss of Chinese Tourists?
In the face of this crisis, Japan‘s tourism industry is scrambling to fill the void left by Chinese tourists. Despite Japan’s efforts to diversify its tourism offerings, attracting tourists from other countries has proven challenging. Although South Korea, Taiwan, the United States, Australia, and Southeast Asia are expected to provide some alternative sources of visitors, they are unlikely to fully compensate for the high-spending Chinese tourists.

Japan’s tourism sector is also seeing a rise in domestic tourism. With fewer international visitors, local shoppers and tourists are stepping in to support businesses, which has provided some relief. However, this shift to domestic demand is not enough to offset the loss of foreign income, especially from Chinese travelers, whose spending patterns had become essential to Japan’s tourism-based revenue.

The Long-Term Outlook: A Shifting Focus and Diplomatic Efforts
The longer the diplomatic dispute between China and Japan continues, the more it threatens to reshape the travel landscape. While Japan is focused on diversifying its international tourism sources, it also aims to reduce its reliance on Chinese visitors in the long term. This diversification might come through increased domestic tourism, stronger ties with countries outside of Asia, and a more diversified tourism strategy focusing on cultural tourism, luxury shopping, and unique Japanese experiences.

On the diplomatic front, Japan continues to protest China’s actions while seeking back-channel diplomatic solutions to avoid further escalation. The country is also accelerating efforts to strengthen its economic and security alliances with countries like the United States. These moves aim to reduce Japan’s dependence on China in various sectors, including tourism.

The Future of Japan-China Relations and Its Impact on Tourism
The ongoing tensions between Japan and China reflect a broader shift in the geopolitical landscape, and the tourism industry is caught in the middle. The bilateral relationship between Japan and China has often been influenced by both cultural exchanges and economic cooperation. However, as political tensions grow, it remains to be seen how Japan can navigate this complex situation while mitigating the economic impact on its tourism sector.