The Kansai region, a vibrant hub of culture and commerce, is facing a significant economic challenge. While Japan as a whole is grappling with a decade-high surge in corporate bankruptcies in 2025, a sudden and unexpected blow to Kansai’s vital tourism industry is creating a perfect storm, with Osaka at its epicenter.
A National Problem with a Local Twist
Across Japan, businesses are under immense pressure. National data for 2025 revealed that corporate bankruptcies have hit their second-highest level in ten years, driven by persistent inflation, rising material costs, and labor shortages. However, the Kansai economy is battling an additional, formidable foe: a sudden ban on group tours from China. This external shock has sent ripples of uncertainty through a region that has long thrived on international visitors.
The Heavy Reliance on Inbound Tourism
To understand the severity of the situation, it’s crucial to recognize Kansai’s, and particularly Osaka’s, deep dependence on tourism. Before the global pandemic, the region was a top destination for international travelers.
According to data from the Osaka Convention & Tourism Bureau, in 2019, Osaka Prefecture welcomed a record-breaking 12.3 million foreign visitors. Of these, tourists from mainland China were the largest contingent, numbering approximately 4.6 million and accounting for nearly 38% of the total. Their spending power fueled a vast ecosystem of hotels, restaurants, retail stores, and transportation services. This reliance, once a powerful engine for growth, has now become a point of acute vulnerability.
The Immediate Fallout: A Wave of Cancellations
The impact of the group tour ban was immediate and severe. Hotels that were heavily booked with tour groups months in advance are now facing empty rooms. Tour bus companies have seen their schedules wiped clean, and duty-free shops in areas like Shinsaibashi and Dotonbori, which specifically catered to large tour groups, are reporting a drastic drop in foot traffic and sales.
This abrupt halt has not only impacted revenue but has also thrown business planning into disarray. Many small and medium-sized enterprises (SMEs) in the hospitality sector, already strained by rising operational costs, now face a critical cash flow crisis, accelerating the risk of bankruptcy.
Future Outlook: A Ripple Effect Across the Economy
The consequences of this downturn are expected to spread beyond the tourism industry.
Impact on Employment and Local Businesses
The immediate threat is to employment. With significantly reduced business, hotels, travel agencies, and souvenir shops may be forced to reduce staff hours or resort to layoffs, impacting the livelihoods of thousands of local residents. The ripple effect will also hit suppliers, from food wholesalers to cleaning services, who depend on the thriving tourism trade.
A Call for Diversification
This crisis serves as a stark reminder of the risks of over-reliance on a single market. In the long term, it will likely force a strategic rethink within Kansai’s tourism industry. Regional authorities and businesses will need to accelerate efforts to attract a more diverse range of visitors, promoting the area’s attractions to markets in Southeast Asia, Europe, and the Americas. The focus may shift from mass group tourism to promoting experiences for independent travelers and high-value tourism.
For individual travelers planning a trip to Osaka, this period may present a mixed picture. While the local economy struggles, visitors might find popular sites less crowded. Supporting local, independent businesses during your visit can make a tangible difference to a region navigating this challenging economic landscape. The resilience and charm of Kansai remain, but its path to recovery will depend on adapting to this new reality.
