Increase in Inbound Tourists and Long-Term Decline of Rural Economy in Japan: A Multi-Regional Computable General Equilibrium Analysis

Abstract

Growth in inbound tourism is expected to stimulate the Japanese economy because expenditure incurred by tourists could compensate for the decrease in consumption owing to the country’s declining population. This study conducted a simulation analysis using a multi-regional computable general equilibrium model to examine the economic impact of inbound tourists on 47 Japanese prefectural level regions. As inbound tourists visit all the regions, their economy grows in the short term. However, the impact is greater in the urban areas, which receive a higher number of tourists than the rural areas. Moreover, over the long term, people migrate from rural to urban areas where there is higher growth, leading to further growth and commercialization of urban areas. Therefore, rural regions could still suffer even if tourism leads to overall economic growth. For the development of rural regions, it is necessary to attract inbound tourists specifically to these areas.