Luxury tax hike: Saving a city overrun by tourists

The iconic Fushimi Inari Taisha, located at 68 Fukakusa Yabunouchicho in Kyoto’s Fushimi Ward, is one of Japan’s most visited shrines. Known for its thousands of vermilion torii gates, it has become a symbol of Kyoto’s struggle with overwhelming tourist crowds. Photo by Ye Min Htet on Unsplash

Kyoto, the ancient capital of Japan and home to UNESCO-listed temples and traditional districts, is taking decisive action to address overtourism.

The city plans to implement Japan’s highest accommodation tax by 2026, aiming to tackle overcrowding, protect its cultural heritage, and ensure sustainable tourism.

The proposed tax system

Currently, Kyoto’s lodging tax ranges from 200 yen ($1.35) to 1,000 yen ($6.75) per night, based on accommodation rates. The proposed revision introduces five tiers, with the highest tax at 10,000 yen ($67.50) for luxury accommodations priced at 100,000 yen ($675) or more per night. Officials estimate this change could double the city’s annual tax revenue from 5.2 billion yen ($35 million) to over 12 billion yen ($81 million).

Daisaku Kadokawa, who served as the mayor of Kyoto from 2008 until February 2024, expressed concerns about the impact of overtourism on the city's cultural heritage during his tenure. Alreday in early October 2018, he stated that the key is to disperse crowds in crowded times, crowded areas or crowded seasons, highlighting the challenges posed by the increasing number of visitors to Kyoto.

Tackling overtourism

Overtourism has strained Kyoto’s infrastructure, particularly in popular districts like Gion and the Fushimi Inari Shrine. Crowded streets, environmental degradation, and disruption to daily life have left many locals frustrated.

–It’s overwhelming, said a Kyoto resident interviewed by The South China Morning Post.

–There are days when the streets are so packed with tourists that it’s hard to even walk to work. The charm of our city feels like it’s fading.

The increased tax aims to reduce visitor numbers and fund projects like enhanced public transportation, preservation of historical sites, and tourism management initiatives.

Koji Matsui, who assumed office as Kyoto's mayor in February 2024, has prioritized addressing the city's overtourism challenges. According to the Japan Times, in February last year, he proposed introducing a new public transportation fare system that would lower costs for residents while raising them for visitors.

South China Morning Post wrote that Matsui's initiatives aim to alleviate the negative impacts of overtourism on local communities. However, some experts caution that such measures could inadvertently affect the city's tourism industry, which is vital to its economy.

In addition to transportation fare adjustments, Matsui has introduced the Tourist Express Bus service to manage tourist flow more effectively. While this service has received positive feedback from visitors, there are varying opinions on its effectiveness in addressing the broader issues of overtourism.

News On Japan

Matsui has also expressed caution regarding the implementation of dual pricing systems for foreign tourists, emphasizing the need to avoid discriminatory practices.

Concerns about economic impacts

Despite its goals, the plan has sparked debate. Experts warn of potential drawbacks, such as tourists opting to stay in nearby cities like Osaka to avoid higher taxes, visiting Kyoto only on day trips.

–This could hurt Kyoto’s hotels and shift the burden of overtourism to other cities, said Dr. Junko Yamamoto, a tourism economist at Kyoto University.

–The key will be how the city uses the additional revenue to directly benefit both residents and visitors.

Domestic travelers are also a concern. While international tourists benefit from the weak yen, higher lodging costs might deter Japanese visitors.

–Many Japanese families already find travel expensive, said Ryota Takahashi, a Kyoto hotelier.

–We’re worried this might push them to choose other destinations.

A model for sustainable tourism?

Kyoto’s approach reflects a broader trend in Japan. Other cities, like Fukuoka, have introduced lodging taxes to manage tourism while supporting local economies. Japan, enjoying a tourism boom due to relaxed travel restrictions and the weak yen, is grappling with how to balance visitor growth with sustainability.

Hiroshi Nakamura, a tourism consultant said Kyoto’s decision could become a model for other cities worldwide dealing with similar challenges.

–It’s about finding the right balance between welcoming visitors and preserving what makes a destination special.

Looking ahead

As Kyoto implements this ambitious plan, all eyes will be on how the city balances its goals of reducing overcrowding while supporting the local tourism industry. The success of the new tax will depend on careful management and transparent use of the funds to ensure benefits for both residents and travelers.