Record-weak yen sparks surge in Japan travel bookings

Won-yen rate hits 18-year low

Travelers rush to exchange currency in advance

Lower living costs in Japan drive booking surge

Weak yen offsets rising airfare

Korean visitors to Japan on track to top 10 million this year

"This is the weakest yen I've seen in 10 years. I bought some at 900 won and it kept falling, so I've been buying more to average down."

The won-yen rate's slide to the mid-800s per 100 yen has ignited enthusiasm for travel to Japan. Demand for advance currency exchange — travelers stocking up on yen while it is cheap — has surged, with social media and online communities filling up with posts sharing exchange tips and Japan itineraries.

The won-yen rate is hovering near historic lows. On the Seoul foreign exchange market, the cross rate fell as low as 842.19 won per 100 yen during trading on Wednesday — the weakest level since Jan. 2, 2008, when it stood at 833.40 won, a gap of roughly 18 years and nine months.

The decline is not a sudden drop but a trend that has built over several months. Data from the Bank of Korea's Economic Statistics System show the monthly average won-yen rate fell from the 950-won range per 100 yen in June to the 920s in July, the 880s in August and the 860s in September. In October the average has slipped to around 850 won — a drop of more than 10 percent from June — and some market participants are now discussing the possibility of a move into the low 800s.

The weaker yen has meaningfully reduced travel costs. Based on the average exchange rate in June, converting 100,000 yen cost about 950,000 won ($709), but the same amount now costs roughly 850,000 won. In just four months, travelers are saving close to 100,000 won ($75) on a single exchange.

Travelers open their wallets as Japan bookings climb

Ginza district in Tokyo, Japan [Provided by Japan National Tourism Organization]

As the cost burden eases, travel agencies have all reported a jump in Japan bookings. Major agencies said reservations have been climbing steeply as the weak yen coincides with the autumn foliage and winter hot-spring seasons.

Kyowon Tour's fourth-quarter Japan product bookings rose 161 percent from a year earlier. Modetour said the number of travelers it sent to Japan in the third quarter grew 31.7 percent year-on-year, with October bookings up 34.2 percent. Very Good Tour reported that Japan reservations since September are up 34 percent compared with the same period last year. Growth rates vary by agency depending on their prior-year base, but the upward trend is broad-based across the industry.

The travel industry attributed the strong performance to two main factors: the weak yen and the expansion of routes to smaller cities. The opening of air connections beyond major urban centers to regional destinations, combined with lower on-the-ground expenses, has driven demand.

"The expansion of flight routes has played a role, but the more pronounced yen weakness compared with last year has reduced the cost of staying in Japan, and that is what has lifted demand," said Kim Dong-il, a manager at Kyowon Tour.

The weak yen is also helping to offset rising airfare fuel surcharges triggered by a rebound in international oil prices. The Singapore jet fuel price, which serves as the benchmark for international fuel surcharge calculations, rose about 6.2 percent from the previous month to $158.57 per barrel in October. As a result, the international fuel surcharge tier climbed for two consecutive months — from level 14 in August to level 21 in September and level 23 in October. Even so, the impact on travel sentiment has been limited, as savings on accommodation, food and other in-country expenses outweigh the increase in airfare.

"Japan package prices have risen 10 to 20 percent because of higher airfares, but bookings have not slowed — and that is because of the weak yen," said Lee Sang-pil, a department head at Very Good Tour. "The weak yen is clearly having a positive effect on people's willingness to travel to Japan."

Southeast Asia loses ground as Japan surges on weak yen

Night view of Hakodate [Provided by Japan National Tourism Organization]

Japan's dominance stands in sharp contrast to trends on nearby Southeast Asian routes. According to the Ministry of Land, Infrastructure and Transport's aviation information portal, Japan route passengers totaled about 23.95 million in the first nine months of this year, up 20.5 percent from a year earlier. Southeast Asian destinations, meanwhile, posted declines: Vietnam drew about 7.33 million passengers (down 5.4 percent), Thailand about 2.55 million (down 14 percent), the Philippines about 2.72 million (down 14 percent) and Malaysia 790,000 (down 16.8 percent).

Some in the industry interpret Japan's strong demand as absorbing travel that would otherwise go to other short-haul destinations. "Higher fuel surcharges and rising local prices have softened demand for Southeast Asia, and Japan appears to be capturing some of that demand," said Kim of Kyowon Tour.

Others, however, see the dynamics as closer to new demand creation than direct substitution, given the distinct appeal of each destination. "China draws travelers for its tourism content, Southeast Asia for leisure and relaxation, and Japan for the weak yen and expanded small-city routes — so I think different traveler segments are driving each market," said Lee Yun-woo, a manager at Modetour.

Across the industry, the consensus is that Japan travel will remain strong for now as long as the weak-yen environment persists. With seat capacity expanding beyond Tokyo and Osaka to cities such as Kobe, Hiroshima, Aomori and Hakodate, demand is expected to stay solid through the fourth quarter and into next year.

"The expansion of small-city routes by airlines, combined with the weak yen, has driven demand, and the strong momentum should continue in the second half of the year as autumn foliage and winter hot-spring seasons bring peak travel," said Park Eun-jeong, a senior official at Hana Tour.

Japan expects Korean visitor count to top 10 million this year

The industry flags natural disasters and the state of South Korea-Japan diplomatic relations as the main wild-card risks. "Japan travel will hit its peak during the winter high season from December through February," said Lee of Very Good Tour. "If there are no sudden disruptions such as an earthquake or a deterioration in South Korea-Japan relations, this trend will continue through 2027."

In the near term, the sustained weak yen is expected to push the number of Korean visitors to Japan to a record high this year. An official at the Japan National Tourism Organization's Seoul office said Korean visitors numbered about 9.45 million last year, but the cumulative total through August this year reached about 7.42 million — up 21 percent from the same period a year ago. "Surpassing 10 million this year is a certainty, and reaching 11 million is possible once the second-half figures are tallied," the official said.

Analysts caution, however, that the current structure — in which record yen weakness is the primary driver of demand — could become a double-edged sword if exchange rates shift. Should the yen begin to strengthen, travelers could quickly redirect to alternative destinations with more competitive pricing.

A report by the Korea Tourism Organization on the impact of yen weakness on the Japan travel market and consumer spending found that 25.5 percent of respondents said they would be likely to hesitate about traveling to Japan if the yen strengthened.

"For markets in countries close to Japan, such as South Korea and Taiwan, yen weakness is one of the factors drawing travelers to Japan," the report said. "If the yen enters a period of strength, there is a possibility that travelers will shift to relatively cheaper destinations such as Southeast Asia."

terry@heraldcorp.com