Japan and China at Odds: Osaka’s Tourism Plummets as Chinese Visitors Flee – What This Means for Japan’s Economy!

Published on December 10, 2025

As tensions between Tokyo and Beijing escalate, Denryu Lin, who operates a vacation rental business in central Osaka, is witnessing a significant downturn. Lin runs approximately 80 vacation rentals in Osaka, but since late November, the cancellations from Chinese guests have been overwhelming, leaving his business in jeopardy. With over 600 bookingscanceled, affecting more than 1,000 Chinese guests, Lin is just one of many in the travel industry facing financial strain.

The Chinese market has been one of Japan’s biggest contributors to tourism, making up about a fifth of the nation’s ¥8.1 trillion ($51.9 billion) tourism revenue. This sudden retreat by Chinese visitors is causing ripples throughout the economy, which had previously relied heavily on tourism as a growth driver. This drastic shift could cost Japan up to ¥1.2 trillion next year if the situation persists. With international travel on pause, Japan is now compelled to seek out alternative markets to fill the tourism void and diversify its visitor base to maintain economic stability.

Impact on Osaka: The Economic Heart of Japan’s Tourism

The city of Osaka, Japan’s second-largest economic hub, is feeling the immediate effects of the downturn. Known as a hotspot for Chinese tourists, Osaka is bearing the brunt of the crisis. Kansai International Airport, which serves the region, has seen the steepest flight cuts across the country, further highlighting the city’s reliance on Chinese tourism. Hotels, retailers, and restaurants across Osaka have reported a wave of cancellations, contributing to an economic slump that extends beyond just the hospitality sector.

The sudden drop in bookings has been particularly hard-hitting in Osaka, a region that experienced a nearly 50% surge in Chinese arrivals earlier this year. The six-month World Expo in Osaka helped boost tourism, leading to high hopes for continued growth in the city. Now, however, businesses are reporting a dramatic slowdown. Tourism areas such as Shinsaibashi and Shinsekai, once bustling with Chinese tourists, are noticeably quieter. Popular tour buses have disappeared, and eateries are seeing fewer patrons. The pressure is mounting on the hospitality sector, with some hotels reporting cancellation rates of up to 50%-70%, particularly in areas like Namba, a major transportation and leisure hub in Osaka.

The Economic Fallout: Japan’s Losses Could Reach Trillions

The decline in Chinese tourists poses a serious threat to Japan’s economy, which has increasingly relied on tourism as a key economic driver. Hiromu Komiya, an economist at the Japan Research Institute (JRI), has projected that Japan could lose up to ¥1.2 trillion next year if travel restrictions continue. This loss could be slightly mitigated to around ¥500 billion if tensions ease quickly, but the financial damage is undeniable.

The sharp decrease in Chinese travelers is further exacerbated by a reduction in China’s airline operations to Japan, which will remain in effect until March 2025. Even once these routes are reinstated, it is expected that Japan will struggle to fully recover the market share it has lost, as travelers may increasingly opt for destinations like South Korea and Southeast Asia.

A Shift in Travel Behavior: The End of Reliance on China

The sudden drop in Chinese tourism is forcing Japan to rethink its reliance on this market. According to Subramania Bhatt, CEO of China Trading Desk, Japan may be able to recover some of the lost volume over the next 12 to 18 months but the era of treating China as an endlessly reliable growth engine for Japan tourism is over for the time being.

This shift in travel behavior is also evident at hotels such as the Stargate Hotel Kansai Airport in Osaka, where the percentage of Chinese customers has dropped by up to 30% compared to pre-pandemic levels. The hotel is now looking to Southeast Asia, Taiwan, and South Korea to make up for the loss of demand. Similarly, Kyoto’s Yojiya cosmetics chain reported a 10% drop in Chinese sales, though this loss was offset by an increase in domestic demand.

Japan’s Diversification Efforts: Broadening the Visitor Base

In light of the ongoing challenges, Japan is turning its focus to diversifying its tourism base. Since reopening post-pandemic, Japan has been encouraging its regions to attract visitors from different countries to reduce reliance on any one group. The progress in broadening the visitor mix has been gradual but noticeable.

For instance, in Gifu, the share of stays by Chinese guests has fallen from 41% in 2019 to just 10% now, according to government data. Similarly, in Shizuoka, the proportion of Chinese guests has dropped from 71% to 45%. Retailers are also adjusting to the changing demand. The Matsuya Ginza store saw a 15% decline in duty-free sales to Chinesetourists last month, but overall sales only dipped by 1.2%. On the other hand, Takashimaya reported a 3.1% drop in duty-free sales, but its overall revenue increased by 3.5%.

The Road Ahead: Japan’s Strategy for a More Resilient Tourism Industry

Although the impact of the Chinese tourism slump is being felt deeply across Japan, it is prompting the country to shift its focus toward a more diverse visitor base. Akiko Kohsaka, a senior researcher at JRI, believes that this change will help accelerate Japan’s pivot towards attracting visitors from a wider array of countries. She noted that the downturn in Chinese tourism might ultimately be beneficial for Japan’s long-term tourism strategy by encouraging regions to rethink their market positioning.

The current challenges in Japan’s tourism sector present an opportunity to lay the groundwork for a more resilient future, one that does not rely too heavily on any single market. The abrupt changes in tourism behavior serve as a reminder of the importance of diversifying visitor sources and developing a more sustainable and adaptable tourism industry.

Conclusion: A Crucial Time for Japan’s Tourism Industry

Japan’s tourism industry is at a crossroads, with the country facing a significant loss in revenue due to declining Chinesevisitors. The impact on Osaka and other major tourism hubs is particularly severe, with many businesses struggling to recover from the sudden downturn. However, the situation may also present an opportunity for Japan to diversify its tourism base and reduce its reliance on any single market.