In July 2024, Japan experienced an unprecedented surge in foreign visitors despite the intense summer heat, largely driven by the weak yen and favorable economic conditions. According to the Japan National Tourism Organization (JNTO), the number of foreign tourists in July reached an estimated 3.2925 million, marking a 41.9% increase compared to the same period last year. This figure not only surpassed pre-pandemic levels by 10.1% but also set a new monthly record for the second consecutive month.

 

The rise in tourism was fueled by various factors, including school holidays in East Asia and Europe, which significantly boosted demand from the previous month. Notably, visitors from Taiwan, the Philippines, and the United States contributed to the increase. On a country-by-country basis, China, which had seen a sharp decline in visitors during the pandemic, reclaimed its position as the top source of tourists with 776,500 visitors. Following closely were South Korea with 757,700 visitors, Taiwan with 571,700, Hong Kong with 279,100, and the United States with 251,200. Out of 23 countries and regions surveyed, 19 set new records for July, with Hong Kong and Mexico also achieving their highest monthly visitor numbers ever.

 

The weak yen, which has plummeted to around 130 JPY per USD, has turned Japan into an attractive and affordable destination for foreign tourists. However, there are concerns that if the yen depreciates further, it may deter certain groups of visitors. Japan's tourism boom is being described as a "massive bargain sale" due to the super yen depreciation, attracting visitors from around the world.

 

This influx of tourists has put considerable strain on Japan's regional airports, many of which are struggling to accommodate the surge in visitors. As a result, several airlines are unable to increase flights or introduce new routes, further complicating the situation.

 

Beyond tourism, the weak yen is having a profound impact on corporate activities, particularly in cross-border mergers and acquisitions (M&A). As the yen continues to weaken, Japan and the broader Asian region are becoming increasingly attractive targets for foreign buyers looking to expand their global footprint. The favorable exchange rates are making Japanese companies significantly cheaper for foreign investors, presenting unprecedented opportunities for strategic acquisitions.

 

In Nov, 2023, Seven & i Holdings announced its acquisition of Australia's "Convenience Group Holdings" which operates 7-Eleven branded stores. The deal, valued at 1.71 billion AUD (approximately 170 billion JPY), reflects Japan's aggressive overseas expansion strategies amid a declining domestic market. As Australia's population is expected to grow, Seven & i aims to accelerate store openings and introduce new products by making the company a subsidiary.

 

Seven & i's subsidiary, 7-Eleven International LLC, will acquire all shares of Convenience Group Holdings, with the transaction expected to be completed between April and June 2024. Convenience Group Holdings operates 751 7-Eleven stores across Australia, making it the largest convenience store chain in the country. Despite previously lacking any capital relationship with 7-Eleven International LLC, this acquisition will bring the Australian 7-Eleven stores into the Seven & i fold.

 

This acquisition is just one example of how the weak Japanese yen is facilitating cross-border deals. As the yen remains weak, we anticipate a drastic increase in M&A activity, particularly from international firms seeking to capitalize on the current economic conditions. The depreciated yen allows for more cost-effective acquisitions of high-quality assets in Japan and Asia, making this an ideal time for companies to expand their portfolios in these regions.

 

We are well-positioned to assist in navigating these opportunities, offering expertise in identifying and securing lucrative M&A deals. For foreign investors eyeing Japan and Asia, the current economic environment presents a golden opportunity to acquire valuable companies at a fraction of the usual cost.

 

However, this bold move by Seven & i comes at a time when the company has faced challenges from shareholders, particularly activist investors pushing for structural reforms. At the company's 2023 annual general meeting, shareholders demanded the resignation of CEO Ryuichi Isaka, citing insufficient efforts toward restructuring. In response, Seven & i has increased the number of independent outside directors on its board, with nine out of fifteen directors now being independent. The board, chaired by Steven Hayes Dacus, former CEO of Seiyu, is tasked with ensuring that proposals from investors such as the activist fund Coustale contribute to enhancing corporate value.

 

 

As Japan navigates its way through economic challenges and opportunities, the effects of the super yen depreciation continue to reverberate across various sectors, from tourism to corporate acquisitions. The record-breaking influx of foreign visitors in July 2024 and the surge in cross-border M&A activity highlight the dynamic shifts occurring in Japan's economy, presenting both challenges and immense opportunities for those ready to seize them.