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Market Insights

Japan Economy Overview

Japan Economy Growth and Exports

Japan's economy is showing resilience, with steady growth driven by exports, technological innovation, and a recovering tourism sector.

Japan Workforce and Consumer Spending

Japan's diverse population, robust workforce, and high consumer spending make it an attractive investment destination.

Japan Tourism & Hospitality Sector

Japan Tourism Growth

Tourist arrival has reached a record high of over 33 million by March 2024, and tourists spent a total of US$35.9 billion in 2023.

Japan Hospitality Sector

Japan's diverse population, robust workforce, and high consumer spending make it an attractive investment destination.

Japan Hotel Investment Highlights

Japan Hotel Investment Growth

In 2023, Japan's hotel investment market surged, driven by strong cross-border investment and a focus on luxury and upscale segments.

Foreign Investment in Japan Hotels

Foreign investors target Japan's hotel sector for portfolio transactions, drawn by attractive yield spreads and a positive economic outlook.

Japan Economy Overview

  • In 2023, Japan ranked fourth globally in GDP, reaching 4.2 trillion U.S. dollars, with a population of 125 million, making it one of the world's largest consumer markets.
  • Japan's economy is expected to grow in 2025. The Japan government has projected 1.2% growth in fiscal 2025.
  • All attribute the growth to expanding personal consumption and increasing corporate investment. Last year, large Japanese firms agreed to boost salaries by 5.1% (on average), the first increase of more than 5% in over 30 years.
  • Major asset management firms like BlackRock are upgrading their ratings for Japanese stocks, buoyed by the country's economic reopening and a $490 billion stimulus package.
Land Size
378,000 sqkm
Japan Population Statistics
Population
125.1 million (2022)
GDP (PPP) per capita
US$ 34,000 (2023)
Japan GDP Growth Statistics
GDP growth
1.9% (2023)
No.1
Travel and Tourism
Development Index
2021
Japan FDI Confidence Index
No.7
FDI Confidence Index
(2024)
Top Target Cross-Border Real Estate Investment in Japan
Top target cross-border real estate investment in Asia Pacific for 5th consecutive year

2024 Asia Pacific Investor Intentions Survey, CBRE

Source: Statistical Handbook of Japan (2023), IMF, Kearney, Nippon.com, japantimes.co.jp

Japan Economy Overview

  • In 2022, Japan's population reached 124.95 million, ranking 11th globally, with 1.6% of the world's population.
  • The largest single city was Tokyo with 9.73 million residents, followed by Yokohama, Osaka, and Nagoya. Population density varies widely among prefectures, from less than 200 to over 1,000 persons per square kilometer.
  • Japan's workforce is approximately 69 million strong, with 73% employed in the services sector. Within this sector, around 4 million individuals work in the hospitality industry.
  • Japan has one of the highest consumer spending rates globally, with a significant portion allocated to leisure and travel. In 2024, the average spend of domestic travelers in Japan is estimated at ¥43,200, which is 113.4% of the figure in 2019.
Largest Cities by Population in 2020 (millions)
Rank City Population (millions)
1 Tokyo 9.7
2 Yokohama 3.7
3 Osaka 2.7
4 Nagoya 2.3
5 Sapporo 1.9
6 Fukuoka 1.6
7 Kawasaki 1.5
8 Kobe 1.5
9 Kyoto 1.4
10 Saitama 1.3

Source: Statistical Handbook of Japan (2023), Statista, World Bank

Japan Tourism & Hospitality Sector

  • International tourist arrivals to Japan increased from 6 million in 2010 to 19 million in 2015 and 31 million in 2019. However, due to COVID-19, arrivals decreased to 4.1 million in 2020. In 2023, Japan saw 25 million international tourists, a significant increase from the 3.8 million in 2022.
  • Tourists spent a total of $35.9 billion in 2023, marking a 10% increase from 2019, with per-person spending increasing by almost 34%.
  • The highest number of guests staying at accommodations is in the Kanto, Kinki, and Kyushu regions.
  • In a May 2024 report by Nikkei Asia, it was reported that international visitors are flocking back to Japan, reaching a record high of more than 33 million in March.
Map of Japan Tourism Regions
International Visitor Arrivals to Japan:
2018 - 2023 (Mn)
  • In recent years, the top countries visiting Japan have been South Korea, China, Taiwan, Hong Kong, Thailand, and Singapore.
South Korea Flag
China Flag
Taiwan Flag
Hong Kong Flag
Thailand Flag
Singapore Flag

Source: Japan Times, Japan Tourism Marketing Co., Nikkei Asia

Japan Tourism & Hospitality Sector

  • Japan's hospitality industry is valued at USD 24.79 billion in 2024, projected to reach USD 26.29 billion by 2029, with a CAGR of 1.18%.
  • Domestic hotel brands hold a dominant 90% market share, with Toyoko Inn Co. as the largest chain, offering over 250 properties and 50,000 rooms.
  • The country's hotel and ryokan supply has grown at a CAGR of 1.0%, exceeding 1.7 million rooms by 2021, fueled by rising demand from overseas tourists and domestic travelers.
  • Japan's hotel supply pipeline over the past five years will take time to be absorbed, but it is relatively low compared to other major destinations in the Asia Pacific region. Increasing construction costs across Japan and the growth of the multifamily residential asset class are expected to restrict hotel supply in the medium term.
Total supply (Hotel and Ryokan)
Key Players
-   Tokyo Inn Co Ltd
Tokyo Inn Co Ltd
-   Route Inn Hotels
Route Inn Hotels
-   APA Hotels & Resorts
APA Hotels & Resorts
-   Prince Hotels & Resorts
Prince Hotels & Resorts

Source: Japan Times, Japan Tourism Marketing Co., Nikkei Asia

Japan Hotel Investment Highlights

  • In 2023, Japan's hotel investment volume exceeded JPY 500 billion, driven by favorable factors like low debt costs and a strong operating environment.
  • Cross-border investment accounted for 46% of the total, reaching JPY 240 billion, the highest proportion since 2007.
  • Investors favored the luxury and upscale segments in 2023, which are expected to continue gaining traction due to their limited scale and Japan's affordability compared to other regional markets, aligning with tourist preferences.
  • Hotel supply growth is projected to be at its lowest since 2015, leading to increased investment in existing properties.
Volume of Hotels Transactions (JPY in billions)
Notable Hotel Transactions (2023)
SC Capital Partners Consortium Deal (27Resort Hotels) USD 900 million
Hyatt Regency Tokyo USD 410 million
Rihga Royal Hotel Osaka USD 360 million

Source: CBRE, IPE Real Assets, Savills Japan

Japan Hotel Investment Highlights

  • Portfolio Transactions

    Portfolio transactions, a significant driver of foreign investment in Japan, allow investors to acquire multiple assets in a single deal, providing efficiency, cost-effectiveness, instant diversification, and operational efficiency, often involving management agreements with existing operators to reduce operational risk.

  • Appeal of Yield Spread

    Japan's hotel sector is a prime target for offshore investors due to its attractive yield spread over borrowing costs, notably in Tokyo and Osaka, where spreads reach 2.5% to 3%, offering the potential for significantly higher returns compared to the cost of borrowing.

  • Positive Outlook and International Investments

    Japan's hospitality sector is attracting increased international investments due to a positive economic outlook. Mapletree Investments closed the Mapletree Japan Investment Country Private Trust (MAJIC) in May 2024, managing over JPY 110 billion ($1.0 billion).
Notable Portfolio Transactions in 2022
Buyer Seller Assets Price
Local buyers Kanpo-no-Yado 32 hotels ¥ 8.8 billion
Singapore's GIC Seibu 32 hotels USD 1.3 billion
NA Hotel Trusty 6 hotels NA
Hotel yield spread over borrowing cost

Source: Modor Intelligence