According to a survey of 12,000 tourists in 2013 carried out by the Tokyo Metropolitan Government, the Chinese spend more than any other group, which isn’t surprising. What is surprising is by how much they outspend other nationalities.
On average, a Chinese visitor spends ¥191,741 in Tokyo. The average spent by all foreign tourists in Tokyo is only ¥46,546, which means Chinese spend about three times as much.
After China, the most spent is by Singaporeans (¥135,377), and then Spaniards (¥129,558). Another notable aspect of Chinese spending is that the bulk is not spend on accommodations or dining, but rather on souvenirs, about ¥122,000. The most popular area for Chinese shoppers is Ginza, because that’s where all the luxury brand stores are.
The government wants them to spend even more, and is thus expanding the list of items that foreign tourists can buy without having to pay consumption tax. Previously, consumables like food, liquor and cosmetics were not exempt from CT when bought by foreign tourists at stores in Japan, but since Oct. 1 they are.
The main beneficiary of this new regulation is department stores, which have been doing badly since the consumption tax went up in April. One of the reasons consumables weren’t exempt before was that there was no way to check if the items were consumed in Japan or overseas, and anything consumed in Japan should be subject to tax. But many Chinese buy food and liquor in Japan as souvenirs for relatives and friends.
The discount is given at the point of purchase, which means the store has to be registered to waive the consumption tax. They check the buyers passport to make sure he or she is not a Japanese national. Technically, the item can be checked at the airport to make sure it wasn’t consumed before leaving the country, but that sounds almost impossible to do.
At present foreign tourism is one of the only bright spots in terms of revenues. In August, spending by foreign tourists was 40 percent more than it was last August, and ¥4.7 billion of it was spent in department stores alone. These numbers will probably go up more now that the yen is dropping.
The Ministry of Economy, Trade and Industry estimates that the new duty-free rule will mean a loss of ¥9 billion in CT revenues for the year, but it will also mean a boost in sales of about ¥78 billion, which means it will make up for at least some of the domestic consumption that was lost after the tax increase was implemented.
The duty free system was established in the early 1950s, when less than 40,000 foreign tourists visited Japan in a year. Department stores have always been lobbying the government to expand the list of exempt items, even though administering the system is bothersome for retailers, as well as for tourists, who have to fill out forms. METI is thus thinking of streamlining the system even more by 2020, when the Olympics will be held. At present 5,777 stores belong to the duty-free system.