Japan-China Spat Hits Tourism: Osaka and Kyoto Bear the Brunt, Industry Seeks Western Visitors

Published on December 11, 2025

Japan’s tourism industry, a vital component of its economic growth, is once again facing a severe headwind—not from a pandemic, but from the chilling effect of geopolitics. Following renewed diplomatic tensions with Beijing, particularly over comments related to a potential conflict involving Taiwan, the industry is grappling with a sudden and drastic halt in Chinese group tours and a wave of individual cancellations.

This situation serves as a stark reminder of the risks of heavy reliance on any single market. While Chinese visitors have been the single largest source of foreign tourists and, critically, the top spenders in Japan, the current diplomatic spat is forcing an accelerated pivot toward market diversification, a strategy the industry has been preparing for since previous flare-ups.

The Immediate Financial Shock

The impact of the diplomatic rift—triggered by remarks from Prime Minister Sanae Takaichi—was swift and severe. China responded by issuing travel advisories and urging citizens to refrain from visiting Japan. The consequences are immediate and measurable:

• Mass Cancellations: Cities that rely heavily on the Chinese market, such as Osaka and Kyoto, are bearing the brunt. Hotels in Osaka have reported cancellation rates of 50% to 70% for Chinese reservations extending through the Lunar New Year holiday period.
• Flight Cuts: Kansai International Airport (KIX), a major gateway for Chinese visitors, has seen initial flight schedules between China and Osaka slashed by over 30%, with further cuts anticipated.
• Economic Vulnerability: The loss of Chinese tourists, who account for roughly one-fifth of Japan’s total tourism revenue, poses a significant financial blow. Analysts estimate the potential cost to the Japanese economy could be in the hundreds of millions, threatening the retail, hospitality, and transport sectors. High-end retail, which catered heavily to Chinese shoppers buying luxury goods and cosmetics, is especially vulnerable.

This scenario echoes past crises, notably the decline in Chinese tourism following the 2012 dispute over the Senkaku/Diaoyu Islands, proving that tourism remains intimately linked to political stability in the region.

The Resilience of Diversification

Despite the significant setback, the Japanese tourism sector is demonstrating resilience, largely due to two primary factors: market diversification and the weak yen.

• Lessons Learned from the Past: Japanese tourism leaders, having navigated similar political disputes and the long shadow of the pandemic, are emphasizing the need to avoid heavy reliance on one nation. Companies that had already diversified their clientele—like some bus operators in Tokyo with strong European and American bookings—are mitigating the financial damage.
• The Weak Yen Advantage: The depreciated Japanese yen makes travel to Japan significantly more affordable for tourists paying in US Dollars, Euros, or Australian Dollars. This cyclical tailwind is a major driver of increased demand from Western markets. Tourists from the US, Europe, and Australia are responding to the favorable exchange rates, choosing Japan for longer stays and often spending significantly on high-end accommodation and dining, helping to offset the loss of volume from China.
• Shifting Tourism Base: The overall inbound market is structurally more diversified than it was a decade ago, with strong growth in visitors from countries like Taiwan, South Korea, and Southeast Asian nations. For example, some regions like Kumamoto have reported minimal fallout due to their lower dependence on direct Chinese transport links.

The Path Forward: Quality Over Quantity

The crisis provides an unexpected opportunity for Japan to accelerate its strategy of pursuing high-quality, high-spending tourism over mass arrivals. This pivot aligns with efforts to combat overtourism—a growing problem in hotspots like Kyoto—by encouraging tourists to explore diverse destinations beyond the main hubs.

For Japan, the challenge remains political: managing the diplomatic rift without ceding the economic ground gained through years of tourism promotion. The government remains committed to promoting inbound tourism from various regions, recognizing that a broad and varied appeal is the best insurance against the volatile nature of global politics. The industry, having braced itself against the chill, is now focused on welcoming the visitors who still see Japan as an essential destination, no matter the geopolitical forecast.