Japan's tourism shares slump as diplomatic rift with China worsens

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By Rocky Swift and Gregor Stuart Hunter Tourism-related Japanese stocks plunged on Monday after China warned its citizens against travel to its North Asian neighbour following a widening diplomatic rift over Taiwan.Isetan Mitsukoshi TSE:3099, a department store operator with substantial sales to Chinese visitors, sank 10.7%, poised for its biggest drop in more than a year. Tokyo Disneyland operator Oriental Land TSE:4661 lost 5.9% and Japan Airlines (JAL) TSE:9201 shed 4.4%.On Friday, Beijing warned Tokyo of a "crushing" military defeat if it used force to intervene over Taiwan and warned Chinese citizens against visiting Japan. On Monday, Japan's chief government spokesman, Minoru Kihara, said any move by China to restrict travel would violate an agreement between the nations' leaders.Senior Japanese diplomat Masaaki Kanai will travel to China on Monday to meet counterpart Liu Jinsong in an attempt to soothe the tensions, Japanese media reported."The China–Japan dispute over Taiwan and Beijing's advisory discouraging travel to Japan introduces near-term headwinds for consumer-facing sectors," said Masahiko Loo, a senior fixed income strategist at State Street Investment Management in Tokyo. "Chinese visitors account for roughly 25% of Japan's inbound traffic, making department stores, luxury retail, and hospitality particularly vulnerable," he added.Fuelled by the weak yen, tourism has become an important part of Japan's economy. More than 650,000 tourists from China visited Japan in September, trailing only those from South Korea, according to the Japan National Tourism Organization.Beijing's travel boycott of Japan could result in an economic loss of about 2.2 trillion yen ($14.23 billion) on an annual basis, reducing the nation's real gross domestic product by 0.36%, according to an estimate by Takahide Kiuchi, executive economist at Nomura Research Institute.ANA Holdings TSE:3189, Japan's largest airline, said it would monitor the situation, adding that there had been no change so far in the reservation status of flights to and from China. Its shares slid 3.5%.A spokesperson for Spring Japan, a low-cost subsidiary of JAL, said there had been no changes to its flight schedule, though it was receiving inquiries from customers about cancellations. Ryohin Keikaku TSE:7453, operator of Muji brand stores, sank 9.4% and Fast Retailing TSE:9983, which has mo...

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