War or not,
weak Japan economy
hurts isles

The number of Japanese tourists
would still be light, a UH report says

By Tim Ruel

Even if the war on Iraq weren't causing a drop in Japanese travel to Hawaii -- and it is -- the continuing weakness of the Japanese economy is a bad omen for the state's visitor arrivals.

Hawaii arrivals on Japan Airlines have dropped 40 percent since Thursday, said Gilbert Kimura, sales director for the airline. Kimura said he expects arrivals will continue to be off by 40 percent for as long as the war rages.

That would fit the pattern of the Persian Gulf war in 1991, when Japanese arrivals to the islands fell by 40 percent for two months, then recovered.

The problem these days for Hawaii is that Japanese arrivals have been on a long-term slide, and war is making things worse.

A report released yesterday by the University of Hawaii Economic Research Organization says Japan, which has struggled for the past decade, is years away from economic recovery because of serious unresolved structural problems, including bad debt.

"The number of Japanese visitors to Hawaii would be expected to remain anemic, even without the looming war," said the report, written by UH economists Byron Gangnes and Ari Van Assche.

Late last year, the UH Economic Research Organization had predicted that Japanese arrivals could bounce back 10 percent this year, after falling 17 percent in 2001 and 2.9 percent in 2002. Similarly, the state Hawaii Tourism Authority had set a target of 10 percent growth for Japanese arrivals this year.

But now, at best, Japanese arrivals are projected to grow 5 percent this year, Gangnes said, and that's not considering the impact of war. Gangnes said it's too soon to analyze the war's impact, because much of the information on visitor arrivals is sporadic on a daily basis.

As of yesterday, Japanese arrivals to Hawaii this month were off nearly 12 percent from last year, according to preliminary data from the state Department of Business, Economic Development and Tourism. During the weekend, just days into the war, Japanese arrivals were down 36 percent. That's compared with March 2002, when Japanese arrivals were already down by double digits because of Sept. 11.

Even if Japanese arrivals do increase by 5 percent this year, the total 1.6 million Japanese visitors would be far short of the 2 million who once came here in the mid- to late 1990s.

More important for Hawaii will be the impact on visitor spending.

The Japanese have traditionally been Hawaii's highest spending tourists, with considerable impact on Waikiki. The Hawaii Tourism Authority had set a target of 12.8 percent growth in Japanese visitor spending in 2003.

The UH report assessed several factors of the Japanese economy that point to problems in the short term, including rising unemployment, falling stocks and poor consumption.

Japan's growth this year should be less than 1 percent, Gangnes said.

Japan's jobless rate hit 5.5 percent in January, the result of corporate cost-cutting. The Nikkei stock index has been plunging for years and recently closed below 8,500, hitting a 20-year low. The Nikkei was once near 40,000.

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