The Demand For Tourism: Japanese Visitors In The United States

Abstract

This paper uses the supply-and-demand framework to explore Japanese citizens’ demand for U.S. exported tourism services. The time period chosen analyzes Japanese demand for tourism following Japan’s banking crisis and the subsequent changes in the nature of Japan’s labor market. Traditionally, the literature has found that real GDP is a significant factor in the demand for tourism services. We find that changes in Japan’s real GDP does not appear to explain changes in the Japanese citizens’ demand for U.S. tourism services following Japan’s 1997 banking crisis. However, the structural changes to Japan’s labor market following the banking crisis caused real wages to fall, despite a continued increase in aggregate GDP. We argue that using aggregate measures of income, such as real GDP, is only appropriate when those aggregate measures of income exhibit trends similar to disaggregated measures of income. Other factors of demand, such as the price, the availability of substitutes, and tastes and preferences are shown to operate as economic theory would predict.