(Nov 17): Some of Japan’s biggest tourism- and retail-related stocks slumped after Beijing warned its citizens against travelling to and studying in the country, amid a deepening diplomatic spat between the nations.
Cosmetics giant Shiseido Co plummeted as much as 11.4%, the most since April, while Pan Pacific International Holdings, which operates Don Quijote retail stores, dropped as much as 9.7% — the most since August 2024. The two companies are popular with Chinese tourists.
Department store operator Isetan Mitsukoshi Holdings lost over 12%, with its peers J Front Retailing Co and Takashimaya Co down over 6%. Meanwhile, Tokyo Disney Resort operator Oriental Land Co shares fell over 5% and Uniqlo parent Fast Retailing Co dipped 6.9%, the most since mid-July.
The declines come after Beijing warned students planning to study in Japan of heightened risks for Chinese citizens in the country. The directive followed comments by Japanese Prime Minister Sanae Takaichi that military force used in any Taiwan conflict could be considered a “survival-threatening situation”.
China’s warning “threatens tourism-led sales-growth expectations” for Japanese retailers, said Catherine Lim, a senior analyst at Bloomberg Intelligence.
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There’s also a “heightened risk of boycotts of Japanese goods within China”, which could hurt mainland China sales of Uniqlo, Asics Corp and Ryohin Keikaku Co’s Muji, she added.
Tourism has stood out as a rare bright spot in Japan’s shrinking economy, as the country welcomes a record number of arrivals. In the latest quarter ended September, Chinese tourists were the top spenders among all foreign visitors, accounting for around 27% of ¥2.1 trillion in total inbound consumption, according to the Japan Tourism Agency.
Japan’s monthly inbound travel income could drop by nearly 200 billion yen if Chinese tourist arrivals fall to zero, according to Nomura Securities Co head of FX strategy Yujiro Goto, in a note to clients. The negative economic effect could also delay potential Bank of Japan rate hikes, Goto added.
See also: Japan approves US$135b stimulus to mitigate inflation pain
Japan has aimed to capitalise on its tourism momentum, setting a target to increase annual arrivals by nearly 60% to 60 million by 2030. Yet uncertainty is growing as political tensions with China rise, according to Amir Anvarzadeh of Asymmetric Advisors.
“This is the beginning of China potentially decoupling from Japan in terms of trade, so we are going to see the temperatures rising,” he said.
Travel-related names were hit Monday, with airline operator ANA Holdings Inc falling 3.8% and hotel chain firm Kyoritsu Maintenance Co down as much as 8.9%.
Chinese airline stocks also fell as travel prospects dimmed. Air China Ltd and China Southern Airlines Co shares were down about 3% at their lows in Hong Kong. Travel agency Trip.com Group Ltd slumped 6% before trimming the loss.
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