Does Japan Have a Yen for Airbnb? Airbnb’s Impact on Japan’s Economy

Table of Contents

Introduction..........................................................................................................................3

Clicking to a Stronger Economy...........................................................................................3

Current Status of Japan’s Economy.....................................................................................5

Tourism’s Contribution to the Japanese Economy...............................................................6

Airbnb Corners the Market on Sharing...............................................................................8

Japan Clicks with Airbnb....................................................................................................10

Minpaku...............................................................................................................................14

Conclusion............................................................................................................................14

Introduction

Since the early sixth century B.C., humans have embraced the fact that the world is shaped like a

sphere, but in the last two decades humans have re-examined the way they think about the globe (Strauss).

In this day and age, people tend to agree with Thomas Friedman’s concept of a world that is flat. It is not

believed to be physically flat. It is definitely still sphere-shaped, but the technological advances that have

been made in the last six hundred years have essentially redefined space and time for mankind.

In the early parts of human history, the world seemed enormously big and disjointed. The globe

felt so big that land masses separated by oceans were considered to be whole new worlds, and those who

ventured out in discovery of those new worlds were hailed as heroes. Names like Christopher Columbus,

Amerigo Vespucci, and Hernan Cortes ring familiar because they belong to men who dared to travel past

the confines of their normal surroundings. They were the first pioneers to use the latest technology available

to them to begin breaking down geographic, cultural, and technological barriers. It all started with ships.

Believe it or not, ships were the linchpin that began the flattening of the world.

The ships that carried Columbus and Vespucci to new lands may have started to flatten the world,

but numerous barriers still existed up until the early 2000s. With the dot com boom came an explosion that

destroyed many of those barriers. In the same way that ships gave individuals freedom to travel to and from

new places in the 1400s, the internet revolutionized the international travel industry. People used to employ

travel agents to plan their trips and make their reservations. Traveling was an ordeal and an extravagance.

It was reserved only for the people who could afford the time and money required to coordinate with a

travel agent, but the internet changed all of that. The development and popularity of the internet soon shifted

the paradigm of international travel. The internet took away the need for travelers to depend on travel

agents, because it gave each individual the ability to act as their own agent. It made travel affordable and

available to everyone. As a result, international travel has become mainstream. Travelers are able to

research a destination, review feedback given by fellow travelers, book a flight, make accommodations,

and take a virtual walk down a street in a foreign city using Google Earth. In essence, travelling across the

world has been reduced to a few clicks and a plane ride. Now, the world truly is flat.

Clicking to a Stronger Economy

The fact that the internet has made travel an attainable opportunity to every individual has

powerfully impacted many nations’ economies around the globe. Once isolated and dependent on

consumers within certain geographic and politial boundaries, economies have been transformed by

international travel. Boundaries are now easily crossed, and economies all over the world are benefitting

from the wealth of other nations, as people who make their money in one country are now able to easily

spend it in another. Japan’s economy, more specifically, has grown considerably as a result of international

travel. A recent editorial for The Japan Times stated, “It seems ironic that the sole bright spot in Japan’s

economy is inbound tourism, boosted by sharp increases in Chinese visitors on shopping sprees. The

number of visitors to Japan in the first 11 months of 2015 rose 47 percent over the same period of the

previous year, and the annual total is estimated to have topped a record 19 million. The figure is certain to

exceed 20 million for the first time this year and is expected to generate up to ¥5 trillion in fresh demand

and have major ripple effects across the country.”

Japan’s tourism industry may have the power to jumpstart its economy’s growth. The soaring

numbers of visitors coming into the country gives Japan the opportunity to capitalize on the marginal wealth

created in other countries (Exhibit B). However, there is one problem: Japan’s tourism industry is crippled

by a serious problem with accommodations. There are not enough hotels in metropolitan areas to support

the volume of visitors, but the internet coupled with the sharing economy may provide a possible solution.

Bloomberg’s Kathleen Chu and Katsuyo Kuwako state, “The hotel occupancy rate has risen to 70 percent

in Japan, the highest level since the Japan Tourism Agency started to gather the data in 2010. The occupancy

rate for hotels in Tokyo and Osaka reached 84 percent and 90 percent. More than 500,000 guests have

stayed in homes rented through Airbnb in Japan since 2010.”

Leveraging Airbnb properly could be a feasible solution to several of Japan’s economic problems.

Its online services and home-sharing methods have already begun to revolutionize Japan’s tourism industry,

and it has the potential to increase its impact on the entire economy in the long-run. While Japan’s supply

of lodging struggles to keep up with the growing demand from traveling tourists, Japan is Airbnb’s fastest

growing market (Mayger).

Despite the surge in tourism and the shortage of lodging, traditional hotels have felt threatened by

Airbnb’s success in Japan. They have placed pressure on the government, which has in turn responded to

those pressures, by releasing guidelines for home-sharing. These guidelines essentially make Airbnb’s

model for home-sharing illegal, leaving Airbnb in need of a legal workaround (Nakamura & Takahashi).

This move against the sharing economy could have unforeseen negative effects on Japan’s economy. Right

now, Japan’s economy is in flux. It is dependent on consumer and foreign spending, so policies or laws that

limit spending would be counterproductive to the government’s efforts to increase consumption. In order

to see this more clearly, one must take a more detailed look at the current state of the Japanese economy.

Current Status of Japan’s Economy

In 2012, the Japanese people elected Shinzo Abe to the position of Prime Minister. Since his

election, the term “Abenomics” has been coined and become recognized all over the world, because it refers

to the Prime Minister’s plan for

“unprecedented monetary

easing, government spending and

business deregulation” (Sharp). Abenomics

seemed to be working in 2013 as the yen’s

value fell against the dollar. According to

The Wall Street Journal staff, “the yen

slipped to its weakest level against the U.S.

dollar in nearly eight years.” This

devaluation of the yen attracted foreign

spending, trade, and investment, and it ultimately contributes to Abe’s plan to shock the Japanese economy

out of its twenty-year lull by reaching a 2 percent target inflation goal (Sharp).

Abenomics seemed to be working in the first couple of years of its implementation, but Japan’s

overall progress towards their economic goals seemed to stall in 2015 (Exhibit A). The yen began to

strengthen, and while inflation has increased in certain portions of the economy, the overall inflation rate

is well below the 2 percent target (Ip). The inflation rate is likely to hover around 0 to 1 percent unless the

Japanese government takes some intentional action. Specifically, the government needs to focus on

motivating the economy to raise real wages across the board. Given the fact that Abenomics depends on

Figu

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Figure 1

increased spending and investment, it is vital to put more money into people’s pockets. According to The

Wall Street Journal’s Greg Ip, “Low inflation is partly due to plunging oil prices. But more important is the

puzzling failure of wages to rise much despite the lowest unemployment in 19 years.” In other words, the

government must find a way to remove restraints on wages and perhaps even give the public and private

sectors a nudge in the right direction – up. The same is true with price controls. They need to be removed,

and the government needs to allow the market to

work out the wage versus price equilibrium. At this

point, the government is continuing their efforts to

stimulate the economy by implementing negative

interest rates. Negative interest rates are designed to

penalize excess saving by banks, inspire banks to

invest or pursue profit-making activities, and drive

foreign savings elsewhere (Randow & Kennedy).

Negative interest rates are a sign of desperation, and

they are ultimately a gamble. They could have the

desired effect on the economy, but they could also backfire and drive the investment rate down. Japan is

taking that risk. Regardless, the Japanese government is ready to intervene in the economy and tip the scales

in any way needed to achieve the desired result. In short, Japan’s economy is currently little more than a

petri dish. It is the testing ground for economic theories and the gambling table for players willing to take

risks. Is the Japanese leadership missing a key opportunity to encourage grassroots spending and profit-

making though? There is an opportunity right in policymakers’ backyards, and it has to do with tourism

and the sharing economy.

Tourism’s Contribution to the Japanese Economy

For many years, Japan has proven to be a destination that does not disappoint travelers. It has been the

focal point of worldwide attention in the past, and it will continue to attract global attention in years to

come.

• 1964 Summer Olympics

• 1972 Winter Olympics

• 1998 Winter Olympics

• 2002 FIFA World Cup (co-hosted with South Korea)

• 2019 Rugby World Cup

• 2020 Summer Olympics

Figu

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• 2022 FIFA World Cup (bid)

It is currently slated to host two major world events and has also bid on a third.

It is expected that these upcoming events will contribute greatly to Japan’s plan to stimulate its

economy. The Bank of Japan is forecasting a significant increase in GDP over the next few years, an

increase that is anticipated to be worth several trillion yen (Figure 4). In his article for The Japan Times,

Matsutani captures a piece of the swirling debate regarding the economic impact the 2020 Olympic games

will have on Japan. His article states, “The Institute for Urban Strategies said in January it estimates the

economic effects to be ¥19.4 trillion. “I think it’s a somewhat conservative number. The more factors

included in the estimate, the bigger the number,” Ichikawa said. While the Tokyo Metropolitan Government

announced the economic effects would be ¥3 trillion, Ichikawa’s institute factors in more items than the

government, which only considered effects directly related to the Olympics such as construction of the

facilities to be used by athletes and others involved in the Olympics and the operating costs of the Games.”

While the actual number has yet to be determined, it is clear that Japan’s economy will be benefit from the

Olympics. Not only will domestic consumption and investment increase, but foreigners from all over the

world will travel to Japan, stay in Japan, and spend money in Japan.

The Bank of Japan is not only certain that construction and increased infrastructure for these events

will contribute to increased GDP, but it is also depending on an increased number of foreign visitors to give

the economy a boost. Their Economic Impact of the Tokyo 2020 Olympic Games report released in January

stated, “The experience of previous host countries shows that the number of foreign visitors already starts

to climb from around the time when the host city is chosen rather than the year that the Games are held,

with increases typically outpacing the trend observed in the 10 years running up to the selection as host

Figure 4

country. Mizuho Research Institute [2014] highlights that Australia, for example, as a result of active

measures to attract visitors in the run-up to the Sydney Olympics, received 20 percent more foreign visitors

in the year that the Games were held (2000) than the trend prior to Sydney’s selection as the host city.

Similar patterns can be found for Greece (Athens, 2004), China (Beijing, 2008), and the U.K. (London,

2012).”

Based on the current status of Japan’s economy, it is quite clear that Japan must capitalize on the

thousands of foreign visitors the Olympics, Rugby World Cup, and possibly, the FIFA World Cup will

bring into the country. The economy is in need of greater consumption, and who better to consume than

thousands of visitors who are on vacation and ready to spend money? One could easily argue that an

increased amount of visitors could be the short-term difference maker in the Japanese economy. In fact, it

appears that the tourism industry will prove to be one of the economy’s greatest assets in rebuilding its

global strength. That’s where Airbnb comes in.

Airbnb Corners the Market on Sharing

Airbnb is a web-based service that pairs people who are looking for accommodations with travelers

who are willing to rent anything from a single room to an entire house. It has given everyday people the

ability to be innkeepers, very much like Uber has given regular people the chance to become taxi drivers.

Airbnb acts as a digital matchmaker, matching the traveler with a host. Every successful match made, means

Figure 5

Airbnb receives commission from both the host and the traveler. Airbnb is proof of a world where

boundaries continue to crumble and the flat-earth theory grows increasingly credible with each click on the

mouse.

Airbnb has been met with unparalleled success, as many travelers are exchanging pricey hotel stays

for more local and authentic shared lodgings. This success can be seen in the fact that the company’s

valuation recently rang in at $24 billion. A recent article by Winkler and Macmillan for The Wall Street

Journal stated, “Home-rental site Airbnb Inc. has given potential investors in a $1 billion funding effort an

ambitious revenue forecast to justify a richer valuation than hotel giant Marriott International Inc. Airbnb

representatives in recent months told prospective investors the startup expects $850 million in revenue this

year, according to people who viewed the projections. That would be more than triple the recorded revenue

of $250 million in 2013. Airbnb recently raised that projection to more than $900 million after its site

performed better than expected in the first quarter, said a person familiar with the matter. The company’s

revenue is then expected to grow to $10 billion in 2020, said the people who viewed the projections”.

Airbnb’s growth potential is stunning, but what is even more interesting than its future financial prospects

is its ability to change the economic landscape.

Companies like Airbnb that capitalize on the growing sharing economy have undermined B2C

relationships, because now P2P (peer-to-peer) relationships are not only possible but advantageous to

both the supplying and demanding parties (Gavel). People with excess supply can lend a piece of their

capital to a person with demand. The supplier has nothing to lose, because the capital they are lending is

Figure 6

excessive to them. The supplier has an opportunity to generate revenue from a sunk cost, so there are only

benefits to be gained from this type of sharing. On the other hand, the person with the demand is looking

to pay the lowest rate possible for the capital they are borrowing. The lowest required rates of return are

going to exist in the sharing economy, because the supplier is offering excess capital and does not have a

serious need for a high rate of return. In addition, the sharing economy increases supply options, meaning

an increase of P2P relationships reduces scarcity and cause the required rate of return to fall. B2C

relationships, on the other hand, are driven by a scarce amount of supply, so the rate of return will

inevitably be higher. In acting as the liaison between supply and demand, Airbnb has created a new point

of equilibrium in the market, and the Japanese people and foreign visitors alike have responded positively

to this change.

Japan Clicks with Airbnb

Japan has largely contributed to Airbnb’s recent profitability, as it is Airbnb’s fastest growing

market (Nakamura & Takahashi). Due to the increased amount of tourism and hotel shortages in Japan,

Airbnb has been able to establish

a niche in the Japanese tourism

industry. Airbnb first began its

relationship with Japan in 2010,

and since then it has established

properties in all 47 prefectures

(Airbnb). In an economic impact

study released in late 2015,

Airbnb asserted that the company

had made a ¥221.9 billion impact

on the economy and supported

21,800 jobs in Japan. The study

showed that more than half a

million visitors used Airbnb

during their stay in Japan, and a

large majority were in Japan on

vacation. Over half of Airbnb

guests are Asian, with the largest

percentage coming from China.

Figure 7

Assuming that 13 to 15 million foreign visitors traveled to Japan in 2015, this data implies that 3%

of all foreign visitors used Airbnb to make arrangements for their accommodations. In other words, Airbnb

has managed to establish a healthy market share in only 5 years. Future growth is almost inevitable given

the projected growth of the tourism industry in Japan, as it continues to attract an increasing number of

foreign visitors. If Airbnb can reach 1 million users by the year 2020, they will have increased their market

share to 5%, approximately increasing their economic impact by ¥4.4 billion. For an economy in need of

stimulus and an increase in marginal income, a ¥4.4 billion contribution could be a significant one for the

Japanese economy. This is a conservative estimate, as Airbnb has seen exponential growth in the last 3

years.

Airbnb’s impact on the tourism industry and overall economy is twofold. First, the affordability of

Airbnb allows visiting travelers to stay longer and spend more. According to Airbnb’s report, “Airbnb

attracts visitors, who stay longer, spend more, and are more likely to return to Japan, fundamentally

strengthening the tourism industry and creating additional opportunities for growth without requiring a

large amount of government investment or expenditure on infrastructure. The majority of international

guests are return visitors who are looking for local experiences”. Their data shows this:

• 69% of international guests are return visitors.

• 79% of international guests reported that their Airbnb experience made them even more likely to

return to Japan.

• 28% of Airbnb guests would not have gone on their trip, or would not have stayed as long without

Airbnb.

• On average, each guest spends a total of ¥169,600 per trip.

• ¥39,800 is the daily average daytime spending per visitor. Daily accommodations per visitor cost

¥4,900. Combined, this means that each visitor spends an average of ¥44,700 per day, and the

average visitor stays 3.8 nights in a single Airbnb.

• 65% of Airbnb guests saved money on their trip by using Airbnb’s services.

• 75% of Airbnb guests who saved money using Aibnb’s services spent that money on shopping,

food, and entertainment.

There are a couple of noteworthy highlights contained in this data. First, returning visitors will

provide long-term benefits to the economy. Second, visitors who stay in the country for a longer period of

time will end up spending more money over that period of time. The more they see, the more they want.

The more they enjoy themselves, the more they will spend. Third, visitors who save money on

accommodations will end up benefitting key sectors of the economy. If by saving money on

accommodations, the visitor is able to spend more money in the shopping, food/beverage, and entertainment

sectors, economic stimulus becomes more widespread and mainstream.

The second aspect of Airbnb’s impact on the economy relates to the income received by individuals

who host travelers. Airbnb has reported that its Japanese hosts are diverse. They are from diverse

backgrounds, age groups, and income brackets. Regardless, becoming an Airbnb host seems to be growing

in popularity. Their data shows that 5,030 hosts took in travelers between the Summers of 2014 and 2015.

Airbnb’s economic impact report asserts, "Airbnb also enables hosts to afford to take professional chances

and pursue their dreams. Over half of hosts, 68 percent, are non-traditionally employed, with 29 percent

saying that income from hosting has allowed them to support themselves while freelancing.” This

information is very important, because it shows that Airbnb is providing people in Japan with an opportunity

to increase their marginal income. Chu and Kuwako’s assert that “the total income the hosts in Japan

received was 8.8 billion yen during the year ended June 2015, according to a survey by Airbnb.”

Figure 8

Basic economics show that an increase in individual marginal income will increase consumption-

driven stimulus. In other words, Japanese Airbnb hosts are able to leverage their capital in such a way that

it provides profit. The profit is then used to offset existing expenses, freeing up a larger portion of a person’s

income for spending or investing.

The information provided by the economic impact report also shows Airbnb is contributing to new

value creation. According to their data, more people are able to cover their expenses through Airbnb, which

means that they are able to leave a traditional job and create new value through research, development, or

entrepreneurship. Innovation also increases with an increase in marginal income, because finding capital to

fund startups or development

projects becomes much easier.

A recent CNN Money

article by Ripley and Wakatsuki

claimed that “the number of Airbnb

guests in the country surged 500%

last year,” and as a result “some

Japanese people have built

businesses out of Airbnb's growing

popularity in their country.” This

means that Airbnb has expanded an

existing market and invited every

Japanese person to join the hotel

industry. In relation to this, Airbnb

hosts come from a broad range of

income brackets. The implications

of this are clear; Airbnb is

contributing to economic mobility.

As marginal income

increases for Airbnb hosts who are

in the lower income brackets,

economic mobility becomes a

reality as these individuals are able to change brackets. The expansion of the middleclass is key to Japan’s

economic development. Japan’s poverty levels have been widely discussed in the last few years, and clearly

the Japanese government has some intentional work to do in this area. Policy, tax codes, and incentives

should be designed to pull people up from poverty into the middle class. This is essential for long-term

Figure 9

economic sustainability. Airbnb is a service that is helping this effort by providing individuals with extra

income.

Minpaku

While Airbnb has been profitable and in high demand in the Land of the Rising Sun, its ultimate

destiny has yet to be determined by lawmakers. It is still quite possible that the sun may set on Airbnb.

“Under pressure from the hotel industry and a populace concerned with the surge of foreigners in their

neighborhoods, Prime Minister Shinzo Abe’s government has released guidelines for home sharing -- called

minpaku in Japanese -- that could make most Airbnb rentals in the country illegal. Airbnb hosts would only

be allowed to rent to guests who stay for a week or longer, a minuscule slice of the market. The national

guidelines only become law if local municipalities decide to ratify them, but that is beginning to happen”

(Nakamura and Takahashi). According to Ripley and Wakatsuki of CNN Money, “those conditions could

leave many Airbnb hosts in the country on the wrong side of the law. Guests stay less than four nights on

average, according to the company. Local authorities are responsible for putting the rules into practice.

Rather than wait for the national plan to be finalized, one district in Tokyo has already gone ahead and

introduced restrictions, and a few others are working on similar moves.”

Whether or not to regulate Airbnb is a key decision that Japan has to make. It will be the difference

between a free economy that is ruled by the balance between supply and demand and a semi-free economy

ruled by government intervention. If Japan makes the wrong decision, it could have very serious ripple

effects throughout the economy. Japan’s economy has laid dormant for several years due to government

meddling. Now, the government is focused on setting the economy on a long-term growth trajectory, yet it

still wants to limit trade and regulate markets. This is a counter-productive choice. If the government truly

wants to remove price and wage controls, they must place an intentional focus on de-regulation. By taking

a limited regulation stance, the government will set the economy up for growth, value creation, and an

increase in marginal income.

Conclusion

The internet has changed the world of international finance. Not only does it allow economies to

coordinate specialization efforts and trade stocks and bonds, but it also gives economies an opportunity to

increase their GDP by capitalizing on the expendable wealth of foreign visitors. For example, Japan’s

economy is plagued by a few economic problems, but research shows that Aibnb can help Japan tackle

these issues.

First, their infrastructure is in need of updating. They are attracting an increasing number of foreign

visitors, but their hotel shortage is hindering them from making the most of each visitor’s stay. Second,

Japan’s economy is in need of greater consumption. For decades, the economy has been regulated by wage

and price controls. The economy is at a point now where it needs to grow, but first the wages and prices

must become market driven. Stimulus must come from an increased amount of spending and investment

from Japanese citizens. The spending of foreign visitors can also help to stimulate the economy as well.

Third, Japan needs to increase the amount of marginal income per individual and build a larger middle

class. Airbnb, an internet-based service, can help Japan work towards solving all of these problems, if

properly leveraged.

Problem 1: Japan’s Infrastructure Needs Updating

Nearly 20 million visitors travelled through Japan in 2015. The government is estimating that the

number will reach 30 million by the year 2020. This is good news for Japan. The visitors will spend money

while they are in the country, which will in turn increase consumption and contribute to GDP. So an

increased number of visitors will benefit Japan, except for the fact that Japan’s current infrastructure does

not support the current or projected volume of visitors.

In an article for The Wall Street Journal, Fujikawa

reports that “the country will face a shortage of 41,000

hotel rooms by 2020 requiring about $4.9 billion in

investment, assuming the number of arrivals reaches

25 million by then, according to Mizuho Research

Institute, a unit of Mizuho Financial Group, one of

Japan’s big three banks. In response, the tourism

agency has budgeted tens of millions of dollars to help

renovate existing hotel rooms, bolster vacancy

information at tourist offices and invite visitors to remote areas where more rooms are available.” Airbnb

can mitigate this shortage and increase the supply of lodging, while also downplaying capital expenditure

on infrastructure improvements. Airbnb already has over 5,000 hosts on record, which means that by adding

it to existing hotels and hostels the amount of lodgings available to guests has expanded to 85,000. While

this does not completely eliminate the shortage, it does make a significant difference. By allowing people

to open up and share their homes with visitors, Japan could continue to expand their offerings of hotels,

hostels, and general accommodations. This will require the government to de-regulate the sharing economy.

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0

In fact, home sharing needs to be encouraged and incentivized by the government, because it provides not

just one but several benefits for the economy.

Problem 2: Japan’s Economy Needs a Greater Amount of Consumption

Data shows that Travelers using Airbnb stay longer, because they pay less for their

accommodations. This in turns allows them to spend more in various sectors of the economy. In order to

get its economy started, Japan needs to focus its efforts on capitalizing off of the marginal income of

foreigners. The data shows that the visitors Japan has received to date are willing and ready to spend. Tourist

spending has exponentially grown in the last few years, as indicated by The Wall Street Journal (Figure

11). Japan is a popular destination for

Chinese travelers. China has an expanding

middle class. As a result, a large amount of

Chinese people are ready to travel and spend

a portion of their marginal income in foreign

countries. Japan should strive to be the

number one destination for Chinese travels,

in order to profit from their expendable

income. The department of tourism should

intentionally target all countries with a large

or expanding middle class.

In order to attract foreign visitors,

alignment within the government will need

to take place. It will not benefit the economy if the department of tourism is successful in drawing foreign

visitors, if the visitors are met with a poor experience arriving and leaving, being processed through

customs, or traveling within the country. Creating an enjoyable experience will take some thought and

expense on the Japanese government’s part. The government will need to incentivize its people to become

more globally aware, and it will need to remove barriers that would keep foreigners from visiting Japan.

That means removing regulations that would hinder Airbnb. The online service is clearly popular,

profitable, and a valuable piece of solving the hotel shortage. Therefore, its growth and prosperity will serve

as a strategic economic advantage to Japan’s economy.

Problem 3: Japan’s Needs to Increase Individual Marginal Income and Expand the Middle Class

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Japan’s economy is in desperate need of increased marginal income and increased spending. This

is due in part to the fact that the Japanese people are prone to save money rather than spend it. How does

an economy solve this problem? The key word is excess. People who have enough income to cover their

basic needs and then have enough left over to spend on their wants will stimulate the economy. Airbnb

offers the Japanese people a way to make excess income. If Japanese Airbnb hosts are able to cover their

cost of living expenses by renting a portion of their home to visitors, anything else they earn through their

job or other means becomes marginal. In other words, Aibnb puts money into people’s pockets, and when

people feel wealthier they spend more. Increased spending money gives people options. They have mobility

between income brackets, because they now have options to invest or spend their money to increase their

earning potential via education or skill development. This is how larger middle classes are created, and

Aibnb has the potential to help this effort along in Japan.

In short, Japan should embrace Airbnb. It has the potential to aid the government’s effort to reform

and reinvigorate the economy. Guidelines and regulations currently being issued by Japan’s government

should be removed. If anything, Japan needs to figure out a way to ensure that taxes are paid on the Airbnb

rentals, but no limits other than taxes should be placed on Airbnb guests or hosts. Rather than limiting

Airbnb, Japan should capitalize on its ability to bring visitors in and keep them in the country longer.

Exhibit A

Exhibit B

Works Cited

2016's economic outlook | The Japan Times. (2016, January 11). Retrieved April 13, 2016, from http://www.japantimes.co.jp/opinion/2016/01/11/editorials/2016s-economic-outlook/#.Vw73HT8u5Ek Airbnb. Airbnb Economic Impact in Japan. (2015, December 04). Retrieved April 20, 2016, from http://blog.airbnb.com/airbnb-economic-impact-in-japan/ Bank of Japan implements negative interest rate - The Nation. (2016, February 17). Retrieved April 17, 2016, from http://www.nationmultimedia.com/business/Bank-of-Japan-implements-negative-interest-rate-30279510.html Chu, K., & Kuwako, K. (2015, November 26). Airbnb to Boost Japan Listings, Its Fastest-Growing Market. Retrieved April 13, 2016, from http://www.bloomberg.com/news/articles/2015-11-26/airbnb-to-boost-listings-in-japan-its-fastest-growing-market Fujikawa, M. (2016, January 19). Tourists Flood Japan, as Nation Struggles to Receive Them. Retrieved April 22, 2016, from http://www.wsj.com/articles/tourists-flood-japan-as-nation-struggles-to-receive-them-1453182278 Gavel, D. (2016, January 7). Analyzing the Growing. Retrieved April 20, 2016, from https://www.hks.harvard.edu/news-events/news/articles/analyzing-the-growing-sharing-economy Ip, G. (2016, March 16). Radical Policy Ideas Resurface Amid Too-Low Inflation. Retrieved April 17, 2016, from http://www.wsj.com/articles/radical-policy-ideas-resurface-amid-too-low-inflation-1458145280 Martin, A., & Pfanner, E. (2016, February 9). Japan Slowly Opens Door to Sharing Economy. Retrieved April 22, 2016, from http://www.wsj.com/articles/japan-slowly-opens-the-door-to-the-sharing-economy-1455008405 Matsutani, M. (2014, September 10). Olympic Games expected to provide economic stimulus | The Japan Times. Retrieved April 17, 2016, from http://www.japantimes.co.jp/news/2014/09/10/business/economy-business/olympic-games-expected-provide-economic-stimulus/#.VxRCpT8u5Ek Mayger, J. (2016, March 9). Japan's Tourism Boom Fuels Airbnb. Retrieved April 13, 2016, from http://www.bloomberg.com/news/videos/2016-03-10/japan-s-tourism-boom-fuels-airbnb Nakamura, Y., & Takahashi, M. (2016, February 18). Airbnb Faces Major Threat in Japan, Its Fastest-Growing Market. Retrieved April 16, 2016, from http://www.bloomberg.com/news/articles/2016-02-18/fastest-growing-airbnb-market-under-threat-as-japan-cracks-down Osada, M., Ojima, M., Kurachi, Y., Miura, K., & Kawamoto, T. (2016, January). Economic Impact of the Tokyo 2020 Olympic Games. Retrieved April 18, 2016, from https://www.boj.or.jp/en/research/brp/ron_2016/data/ron160121b.pdf Randow, J., & Kennedy, S. (2013, December 5). Negative Interest Rates - QuickTake. Retrieved April 17, 2016, from http://www.bloombergview.com/quicktake/negative-interest-rates

Ripley, W., & Wakatsuki, Y. (2016, February 23). Airbnb faces headaches in booming Japanese market. Retrieved April 21, 2016, from http://money.cnn.com/2016/02/23/news/companies/airbnb-japan-challenges/ Sharp, A. (2013, October 9). Abenomics - QuickTake. Retrieved April 16, 2016, from http://www.bloombergview.com/quicktake/abenomics Strauss, V. (2011, October 10). Busting a myth about Columbus and a flat Earth. Retrieved April 12, 2016, from https://www.washingtonpost.com/blogs/answer-sheet/post/busting-a-myth-about-columbus-and-a-flat-earth/2011/10/10/gIQAXszQaL_blog.html WSJ Staff. (2015, March 27). Weak Yen: Good News and Bad News. Retrieved April 16, 2016, from http://blogs.wsj.com/japanrealtime/2015/05/27/weak-yen-good-news-and-bad-news/ Winkler, R., & MacMillan, D. (2015, June 17). The Secret Math of Airbnb's $24 Billion Valuation. Retrieved April 18, 2016, from http://www.wsj.com/articles/the-secret-math-of-airbnbs-24-billion-valuation-1434568517

Sources of Exhibits & Figures

Exhibit A - Japan - Economic forecast summary (November 2015). (2015, November). Retrieved April 20, 2016, from http://www.oecd.org/economy/japan-economic-forecast-summary.htm Exhibit B - The Authority on World Travel & Tourism. (2015). Travel & Tourism Economic impact 2015 Japan. Retrieved April 22, 2016, from https://www.wttc.org/-/media/files/reports/economic%20impact%20research/countries%202015/japan2015.pdf Figure 1 - WSJ Staff. (2015, March 27). Weak Yen: Good News and Bad News. Retrieved April 16, 2016, from http://blogs.wsj.com/japanrealtime/2015/05/27/weak-yen-good-news-and-bad-news/ Figure 2 - Ip, G. (2016, March 16). Radical Policy Ideas Resurface Amid Too-Low Inflation. Retrieved April 17, 2016, from http://www.wsj.com/articles/radical-policy-ideas-resurface-amid-too-low-inflation-1458145280 Figure 3 - Bank of Japan implements negative interest rate - The Nation. (2016, February 17). Retrieved April 17, 2016, from http://www.nationmultimedia.com/business/Bank-of-Japan-implements-negative-interest-rate-30279510.html Figure 4 - Osada, M., Ojima, M., Kurachi, Y., Miura, K., & Kawamoto, T. (2016, January). Economic Impact of the Tokyo 2020 Olympic Games. Retrieved April 18, 2016, from https://www.boj.or.jp/en/research/brp/ron_2016/data/ron160121b.pdf Figure 5 - Osada, M., Ojima, M., Kurachi, Y., Miura, K., & Kawamoto, T. (2016, January). Economic Impact of the Tokyo 2020 Olympic Games. Retrieved April 18, 2016, from https://www.boj.or.jp/en/research/brp/ron_2016/data/ron160121b.pdf Figure 6 – Business Model Toolbox. (2015). Airbnb Retrieved April 20, 2016, from http://bmtoolbox.net/companies-and-stories/airbnb/

Figure 7 - Airbnb. Airbnb Economic Impact in Japan. (2015, December 04). Retrieved April 20, 2016, from http://blog.airbnb.com/airbnb-economic-impact-in-japan/ Figure 8 - Airbnb. Airbnb Economic Impact in Japan. (2015, December 04). Retrieved April 20, 2016, from http://blog.airbnb.com/airbnb-economic-impact-in-japan/ Figure 9 - Airbnb. Airbnb Economic Impact in Japan. (2015, December 04). Retrieved April 20, 2016, from http://blog.airbnb.com/airbnb-economic-impact-in-japan/ Figure 10 - Martin, A., & Pfanner, E. (2016, February 9). Japan Slowly Opens Door to Sharing Economy. Retrieved April 22, 2016, from http://www.wsj.com/articles/japan-slowly-opens-the-door-to-the-sharing-economy-1455008405 Figure 11 - Fujikawa, M. (2016, January 19). Tourists Flood Japan, as Nation Struggles to Receive Them. Retrieved April 22, 2016, from http://www.wsj.com/articles/tourists-flood-japan-as-nation-struggles-to-receive-them-1453182278