Sleeping giant Japan turns to tourism to wake up its economy

The nation hopes to rise from the tsunami's devastation, justas it did from the ravages of war. Mark Leftly reports fromTokyo

Takata, a shaven headed forty-something with 15 years training
in the Japanese art of Inami wood carving, sits cross-legged as he
chisels an incredibly ornate dragon's head for a nearby temple. A
few feet away, the Asahi brewery hands out free samples of its
wares, which are readily snapped up by thirsty Westerners who will
later feast on thinly sliced, melt-in-the-mouth Wagyu beef.

The elaborate hospitality was on display at the World Travel and Tourism Council conference in Tokyo last week, which attracted big-name speakers including Willie Walsh, boss of International Airlines Group (IAG) and Chris Nassetta, chief executive of Hilton Worldwide. This is part of the country's push to rebuild its economy through sectors outside of its traditional strengths following the great tsunami and earthquake that struck the east coast last year.

Even by the most generous measure, travel and tourism today provides no more than 7 per cent of the country's GDP. Ken Okuda, Japan's vice-minister for land, infrastructure, transport and tourism, says that the government wants to double the number of visitors to the country to 18 million within four years.

"Japan continues to be a safe and secure destination, just like it was before the earthquake," he says. "But there is greater room for growth. This [tourism] represents a star of hope."

Japan is looking to diversify an economy that is best known as an industrial powerhouse, but for decades has been badly drained by an ageing population and declining birth rate. Sir Martin Sorrell, chief executive of the advertising group WWP, is typically blunt: "Japan is the third largest economy in the world, but that economic engine hasn't really functioned for 20-odd years."

The industrial strength was the result of reconstruction in the aftermath of the Second World War; now the earthquake will be used to rebuild the country as a tourism hub.

Prime minister Yoshihiko Noda, right, told the conference that "tourism is the frontier for Japan ... vitalising the economy", but the difficulties of achieving such growth can be found in less salubrious parts of Tokyo.

In the working-class Asakusa district, there are still signs of the damage caused by the earthquake. In the apartment block where Chris, a Bromley-raised English language adviser to some of the biggest banks, lives, the roof of one neighbouring building rests against the wall of another. Before March last year, there was a two-to-three-foot gap between them.

On the east bank of the Sumida river, that runs through the district, lie the buildings of the Asahi headquarters, renowned for a Philippe Starck-designed "flame of gold" that is more accurately described as the "golden turd" by locals. So low-lying is this area that it would most likely be wiped out by floods should a powerful earthquake hit the city – and academics at Tokyo University believe there is a 70 per cent chance of that happening within four years.

"From what I heard, immediately after the tsunami real-estate prices close to the ocean started falling," says Chris. "Everyone in Tokyo felt that earthquake, and everyone here knows that we could be hit. But the Japanese people have selective memory loss; they try to forget the bad things that happen. House prices recovered and they might have been worried in the wake of the tsunami, but not now."

Jeff, a Canadian who is editor-in-chief of a popular ex-pat magazine, nurses a £6.85 bottle of beer in Roppongi, an area that is at once seedy and corporate, with adult entertainment themed bars, and towers that house huge corporations such as Google and Barclays Capital.

Jeff points out that the disaster has fundamentally altered the plans of even relatively simple businesses. His magazine used to run weekly, but ink shortages, after factories were hit by the disasters, forced it to print fortnightly. Now it focuses increasingly on its online presence.

Despite the prospect of more earthquakes and certain supply problems, there are signs that the global tourism industry is looking to expand into Japan. IAG's Walsh, for example, says he is "deeply impressed" by the country's post-tsunami recovery and confirms his company will take a small stake – probably less than 10 per cent – in flag carrier Japan Airlines when it lists on the Tokyo stock exchange later this year.

Jesper Koll, the director of equity research at JP Morgan in Japan, adds: "There is no easy growth. But there are powerful resources that are in place. The events of 3/11 ripped corporate Japan out of its complacency – corporates being bought and sold are up six-fold since last year."

While there has been virtually zero growth for years, Japan has invested about 3.5 per cent of its national income in research and development, second globally only to Israel. That alone suggests that a hugely skilled workforce with technological advantages could help less developed sectors grow quickly.

Finally, there is a change in attitude towards tourism, claims Mutsutake Otsuka, vice-chairman of the conference's host committee. "For tourism Japan is 30th around the world, a very sad number. Tourism was looked down upon as fooling around, sloth. But tourism will mean that every citizen will lead a more affluent lifestyle."

Heady ambitions in seemingly dangerous times, but there are signs tourism could be the way Japan wakes itself from of its economic slumber.