Photo/Illutration Tourists stroll through a shopping arcade in front of Hakone-Yumoto Station in Kanagawa Prefecture. (Akifumi Nagahashi)

The number of visitors to Japan in July rose to its highest since the pandemic, official data showed on Wednesday, as a weak yen helped to give boost tourism and contribute to a growth surge in the world's third-largest economy.

The number of foreign visitors for business and leisure was 2.32 million last month, up 12% from June when travelers exceeded 2 million for the first time since January 2000, the Japan National Tourism Organization (JNTO) said.

Arrivals in July were, however, still down 22% from July 2019 before the outbreak of COVID-19 led to travel curbs around the world.

Travelers are pouring into Japan, taking advantage of a slide in the currency that has made holidays the cheapest in decades. Inbound travelers from the United States, Europe, Australia and the Middle East are already above pre-pandemic levels, JNTO data showed.

The recovery is expected to gain steam after China this month lifted restrictions on group travel to Japan, unleashing what has historically been the biggest source of tourists and inbound spending.

Data on Tuesday showed Japan's economy grew an annualized 6% in the April-June period, much faster than expected and aided by strong auto exports and tourist arrivals.

"In 2019, tourism was contributing about 0.8% of GDP, but what took decades to achieve is snapping back from zero over a period of not very many months," said CLSA Japan strategist Nicholas Smith. "So as a contribution to economic growth over a few quarters, it's going be huge."

Japan saw a record 32 million visitors in 2019, and Prime Minister Fumio Kishida is hoping a recovery in the industry will add 5 trillion yen ($34.4 billion) a year to the economy.

Tourism to Japan nearly stopped for more than two years during the pandemic, but arrivals have risen steadily since the government resumed visa-free travel for many countries in October and scrapped remaining COVID controls in May.

Just over 13 million visitors have arrived in Japan over the first seven months of 2023, and an increase in international flights helped boost arrivals in July, the JNTO said.

Visitors from mainland China surged to 313,300 in July, a 45% increase from the previous month, though still far below 2019 figures.

While not at pre-pandemic levels, Chinese tourists are helping to drive strong sales of cosmetics this summer at department store operators such as Isetan Mitsukoshi Holdings and Takashimaya, according to Jefferies analyst Mitsuko Miyasako.

"The full-fledged positive impact of ending the prohibition on Chinese group trip customers is likely to manifest from the end of September around China's National Day," she wrote in a note on Tuesday.

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