This paper analyses the determinants of international tourism, which has increased rapidly in Japan, and its impacts on the economy. The empirical evidence, based on a gravity model using international panel data, provides the robust facts for understanding the international tourism flows. It indicates that income of the origin (importing) country is a major determinant of tourism flows, suggesting that growing Asian neighbours contributed to the recent increase in tourism flows to Japan, while bilateral visa regimes had also an important role for tourism arrivals. In addition, the result, based on a structural VAR model consisting of output, real exchange rate and tourism flows, implies that the tourism is important to help boost Japan’s output.
