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Business Insight


Business Insight

Tax-Free Means Spend More

A record number of tourists visited Japan last year -- over 13 million. They spent more than $16 billion, another record. The country's tax exemption program for international visitors likely has something to do with that, and stores along the Sea of Japan coast want a share of the profits.

Ishikawa Prefecture has been drawing more sightseers since the Hokuriku bullet train line opened in March. In the first 4 months, a tourist information counter at Kanazawa station has seen a 40% increase in people from overseas compared to the year before. Many of them arrive from Tokyo aboard the new Shinkansen line.

Retailers of local handicrafts are rushing to register as tax-free stores. They hope that will convince travelers to spend time and money in their establishments. A shop specializing in Japanese drums is among them. The development is something new in the company's 400-year history.

At tax-free stores, visitors from abroad don't have to pay the 8% consumption tax for things costing more than about $80, so the tourists tend to spend more on goods and services.

A shopper from Germany says she bought an assortment of souvenirs including small taikos for her children. Another tourist from the US says he spent about 46,000 yen. He says he came to the store because it's duty-free, meaning he can buy even more, and he loves it.

The store loves it too. Sales are up. The owner of a Japanese drum shop, Yasuo Asano, says customers are very happy because they pay less at his shop. He says now that his store is registered as tax-free, he hopes to draw even more people from overseas.

The number of tax-free establishments in Ishikawa is almost 5 times what it was just a year ago -- up to more than 140 at last count. Even a convenience store has seen fit to join. It's near restaurants, bars, and hotels catering to international tourists. Visitors often stop in to buy sweets and other items as souvenirs.

The shelves are stocked with local handicrafts. They include lacquer-coated chopsticks from Wajima and bookmarks made of gold leaf. Both items have developed followings outside Japan.

Tax exemption requires more clerks. They have to check shoppers' passports and put the purchases in the dedicated bags. That's all part of the new job description.

A store official instructs the staff to put purchased items in special bags and seal them, and tell customers not to open them until they leave Japan. One of the workers says her English is not very good, so she is unsure whether she will be able to explain the importance of not opening the bags to the customers. She hopes to rely on the written instructions.

Electric appliances, cosmetics, and snacks are already on many people's lists of things to bring back. If Ishikawa's merchants have their way, traditional handicrafts will become must-have items too, meaning more trips to that part of the country.

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