Goldman Sachs economists have warned that the escalating political tensions between Japan and China could have a real impact on the Japanese economy, particularly through a decline in tourism flows and consumer demand.
The bank estimates that a sharp drop in visitors from mainland China and Hong Kong, the most valuable tourist segments, could potentially shave around 0.2 percentage points off Japan's GDP growth.
This projection is based on the 2016–2017 situation when China restricted travel to South Korea following the THAAD missile defense system dispute, which shows how political pressure can directly affect consumer behavior.
In a scenario of a 50% decline in tourists from China and Hong Kong, Goldman expects Japan to suffer a roughly equivalent impact to the current one.
Some of the impact may be offset by the presence of tourists from other markets and the strength of domestic travel.
But after taking these factors into account, Goldman still projects a net drag of around 0.1 percentage point on GDP growth, a figure that is considered significant given Japan's already modest growth trajectory.
The analysis underscores how sensitive Japan's economic recovery is to diplomatic relations with China, especially as the tourism sector is now a key driver of post-pandemic growth.
