Japanese visitors
seen picking up

A UH economics professor expects
modest growth but forecasts continued
woes for Waikiki retailers

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By Lyn Danninger
ldanninger@starbulletin.com

Prospects for the return of Japanese visitors remains uncertain but Hawaii will likely see some modest growth in the immediate future, according to University of Hawaii economics professor Byron Gangnes.

"Although there is a lot of room for concern about Japanese tourism recovery, the good news is that we have seen progress," he said.

Although Gangnes predicts slow and gradual growth in Japanese arrivals for the first quarter of this year, the forecast may be improved since he and colleagues in the University of Hawaii Economic Research Organization produced an economic report for the state's Department of Business, Econo- mic Development and Tourism soon after the events of Sept. 11.

Gangnes presented an economic update to a university forum last night.

"Even though we are still suffering on the Japanese side and will continue to suffer, we've made real progress since October," he said. "The good news today is that in December and the first part of January, although still down, we made a significant recovery from previous numbers. Now we are down 23 percent compared to one year ago. So to us, that's a big upswing."

In the first weeks after the attacks, Japanese visitor arrivals plummeted 60 percent.

There are several reasons for the continued Japanese slump and not all are related to the events of Sept. 11.

"Japan was already in bad shape. Their prospects have been worse since late 2000 so there will be no growth there until mid- to late-year and then not above 2 percent in 2002 for economic activity in Japan," he said.

Gangnes predicts continued problems for Waikiki retailers and more tourism job losses, especially in areas dependent on Japanese tourism.

"Some firms are not in great shape so the recovery of jobs will be slower than the recovery of visitors," he said.

One of Gangnes' major concerns is whether small businesses who have been almost entirely dependent on Japanese visitors can survive.

"I think the real concern is the Japanese-oriented small retailer that doesn't have deep pockets," he said.

Gangnes is more optimistic about Hawaii's economic growth prospects outside of eastbound tourism. Although Hawaii's economy was slowing prior to Sept. 11, it was doing better than many other areas in the country, he said.

"We were still relatively healthy. Real personal income had been strongest in the last year or so here," he said. "We created a lot of jobs, the average family was probably better off and real estate was booming due to low interest rates."

"I'd say we are in a moderate income recession and we do expect to have two to three quarters of income contraction," he said.

Gangnes and his colleagues expect to release an updated report on the state of Hawaii's economy at the end of February or early March.