Weak Yen Deals Heavy Blow to Summer Travel, Overseas Trips Post First Post-COVID Decline

Household budgets shrink, overseas vacation dreams fade

TOKYO – A forecast released on July 2 by major travel agency JTB shows that the number of Japanese travelers going abroad during this summer vacation period (July 15–August 31) is expected to reach 2.17 million, down 8.8% from the previous year. This marks the first year-on-year decline since the pandemic subsided in 2023.

The primary culprit is the persistently weak yen.

Since early July, the yen has continued its slide in the Tokyo foreign exchange market, briefly breaking past 162.80 to the U.S. dollar – a level not seen since December 1986, nearly 39½ years. Despite the government’s record-breaking 11.73 trillion yen market intervention from late April to late May, and a rate hike to 1%, virtually all of those effects have now been unwound.

For ordinary Japanese households, this means that an eagerly anticipated overseas trip is becoming increasingly unaffordable.

“A week in the U.S. costs over 100,000 yen more than last year”

Kenta Tanaka (42), a company employee living in Tokyo, had originally planned to take his family to Hawaii for the summer break. “When I checked the same package last year, it was about 1.1 million yen for four people. This year, the same hotel and flights have gone up to over 1.3 million,” he said with a wry smile. “The kids were really looking forward to it, but we just couldn’t justify the cost, so we ended up changing our plans to Okinawa.”

Tanaka’s story is far from unique. JTB estimates that per-person spending on overseas travel this year will rise 6.3% to 323,000 yen (approximately $2,000). In addition to the yen’s depreciation directly eroding purchasing power abroad, heightened geopolitical tensions in the Middle East have driven up aviation fuel costs, pushing fuel surcharges even higher and adding to the financial burden.

These soaring costs are steering Japanese tourists away from long-haul destinations like North America and Australia. Instead, closer and cheaper destinations are gaining popularity. South Korea tops the list with a 26.2% share of preferred destinations, followed by Taiwan at 16.2%. Meanwhile, due to deteriorating diplomatic relations, travel to mainland China is expected to halve compared to last year.

Domestic travel also under pressure as wallets tighten

If overseas is too expensive, why not travel domestically? The reality is not that rosy.

JTB forecasts 69 million domestic travelers during the summer, a 4.4% decrease year-on-year. Although per-person spending is projected to rise 3.2% to 48,500 yen, that increase is largely driven by inflation, not by a genuine uptick in consumer willingness to spend.

Data from the Ministry of Internal Affairs and Communications show that spending on “culture and entertainment,” which includes domestic and international travel consumption, fell 3.1% year-on-year. Research firms point out that with the deteriorating Middle East situation and continued yen weakness, more households are cutting back on travel expenses.

By destination, the Kanto region including Tokyo leads with 19.0%, followed by Kinki at 14.9%, and Hokkaido at 11.2%.

Consumption polarizes – some save, others splurge

Notably, travel spending is showing clear signs of polarization.

A JTB spokesperson commented: “Some people are reducing costs by shortening their trips or choosing cheaper accommodations, while others are willing to spend more to have their ideal travel experience – we are seeing a clear divide.”

Many are choosing to “trade time for money” – cutting the number of travel days, selecting more budget-friendly lodging, and reducing shopping budgets. Others, with relatively higher disposable incomes, remain willing to pay a premium for a quality travel experience.

A financial professional in Tokyo told reporters: “The weak yen has certainly made overseas travel more expensive, but I don’t want to compromise on our once-a-year family trip. I’ll spend where it counts, but I’ll cut back on other things to compensate.”

Uncertain outlook

Market analysts believe the risk posed by the weak yen lies not only in its level but also in its disorderly decline. Some academics have even predicted that the yen could fall to 170 per dollar or even lower. If foreign exchange interventions prove ineffective, the yen’s weakness may intensify further.

For Japanese people who look forward to a summer getaway, this season may be one of difficult trade-offs between “where to go” and “how much to spend.”