Tourism only sour note

By Kelly Yamanouchi
Advertiser Staff Writer

Japanese travel is the No. 1 drag on Hawai'i's economy, which otherwise is on a path to end the year on a positive note, according to a forecast by two University of Hawai'i economists.

While Japanese tourism has struggled for three months, it has been offset by a robust Mainland visitor market, according to a report issued yesterday by Carl Bonham and Byron Gangnes at UH's Economic Research Organization.

"You've got this massive, anemic, deteriorating Japanese market ... but the overall picture is good," Bonham said. "The economy's doing very well. ... Hawai'i's economy should be to some extent the envy of many other states in the country."

The economists projected 0.2 percent growth in visitor arrivals this year, including a 4.4 percent increase in U.S. arrivals and 18.6 percent decline in Japanese arrivals.

The forecast for next year looks rosier, with an 8.4 percent increase in visitor arrivals, up 4.4 percent from the Mainland and 25.6 percent from Japan.

The increase from Japan sounds large, but would mean only a return to the levels seen in late 2002, Bonham said.

According to the report, Hawai'i's economy has largely recovered from the slowdown after Sept. 11, 2001. The economists pointed to a robust job market and strong housing market. The paths to recovery were similar after Sept. 11, the Iraq war and SARS scare, they said.

But Hawai'i is recovering more slowly from the later events because of Japan's economic slump and heightened geopolitical uncertainty, Bonham said. "The world's not the same as it was three years ago, and that certainly is affecting Japanese travel," he said.

In the broader economy, employment and real personal income are expected to grow this year and next, part of a "bona fide job market recovery," according to the report.

Meanwhile, the inflation rate is projected to reach 1.6 percent this year and 2.5 percent next year.

The state government's fiscal condition has deteriorated in recent months, but not as dramatically as in other states.

Looking forward, the economists expect gradual strengthening of the U.S. economy in coming months, which should bring moderate growth in tourism from the Mainland.

But Japan's economy is "showing very, very little sign of improvement," Bonham said. Japan Airlines' planned cutback on flights from smaller airports before the traditionally strong winter season is "not a good sign," he said.

Ongoing geopolitical uncertainty and the unclear direction of the U.S. economy are also risks, the report said.

Reach Kelly Yamanouchi at 535-2470, or kyamanouchi@honoluluadvertiser.com.

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