1. Revision of Compilation Methodology for Balance of Payments Statistics on Travel in Japan Bank of Japan, International Department June 11, 2004

2. 2 Treatments of travel in balance of payments statistics A component of services under current account - Balance of Payments Manual, 5th edition states, “Travel covers primarily the goods and services acquired from an economy by travelers during visits of less than one year in that economy.” Credit in travel : the amount of money spent by visitors from abroad on goods and services in Japan Debit in travel : the amount of money spent by Japanese travelers overseas on goods and services in foreign countries

3. 3 Backgrounds for the review Deficiencies in coverage both in credit and debit - Rely on settlements and exchange data from banks - Consumption based on yen cash brought into Japan by travelers themselves, and withdrawn from CDs or ATMs in Japan were not included in the statistics (credit). * Significant amount of yen cash is circulating in Asian countries. In this backgrounds, many visitors from Asia bring yen cash for their spending in Japan. - Yen cash taken out of Japan by travelers was also not taken into account (both credit and debit).

4. 4 Former data sources for travel (credit) in Japan’s BOP 1. Cash transfers between travel agencies from inbound package tours (cash settlements data from banks) 2. Turnover on credit cards during visitors’ stays in Japan (cash settlements data from banks) 3. The amount of foreign currency visitors exchanged for yen in Japan (currency exchange data from banks)

5. 5 Chart 1. Conceptual Chart of Travel Credit Items recorded using the previous method A. Traveling expenditures paid via travel agencies Expenditure B. Turnover on credit cards C. Foreign currency exchanged for yen in Japan D. Yen brought into Japan (+) X E. Yen withdrawn from CDs and ATMs in Japan (+) F. Traveling expenses in Japan paid through income gained in Japan (+) G. Yen exchanged for foreign currency in Japan (-) H. Yen taken out of Japan (-)

6. 6 Former data source for travel (debit) in Japan’s BOP 1. Travel expenditures paid by Japanese travelers via travel agencies (cash settlements data from banks) 2. Turnover on credit cards during Japanese travelers’ overseas stays (cash settlements data from banks) 3. Foreign currency and travelers’ checks bought in Japan (excluding those taken back to Japan ) (currency exchange data from banks) 4. Yen flowed into Japan via financial institutions* * How about yen cash flowed via visitors from abroad ?

7. 7 The outline of the survey BOJ planned a survey of visitors from abroad and conducted it in cooperation with Ministry of Finance (MOF) in 2002. Mizuho Research Institute, funded by MOF, carried out the survey from November through December 2002. The institute interviewed 8,539 visitors from abroad and received 8,279 valid responses. - sampling strategy : restricting estimation error ratio within 1% The survey included questions on attributes of the visitors and the amount of yen brought into Japan and so on.

8. 8 Chart 2. Spending Per Visitor from Abroad Compiled Using the Survey Results (Travel Credit) A + B + C= \101,843 Expenditure= A+B+C+X \252,094 D. \156,714X=D+E+F-G-H \150,251 E. \11,604 F. \618G. -\1,828 H. -\16,857 A. Traveling expenditures paid via travel agencies B. Turnover on credit cards C. Foreign currency exchanged for yen in Japan D. Yen brought into Japan E. Yen withdrawn from CDs and ATMs in Japan F. Traveling expenses paid through income gained in Japan G. Yen exchanged for foreign currency in Japan H. Yen taken out of Japan Calculated based on travel credit in 2002 Survey results (average per visitor)

9. 9 Revision of compilation methodology (credit) Average spending per visitor* Number of visitors entering Japan (D+E+F-G-H) X and staying for one year or less (in relevant month) Formula 1. D. Yen brought into Japan E. Yen withdrawn from CDs and ATMs in Japan F. Traveling expenses paid through income gained in Japan G. Yen exchanged for foreign currency in Japan H. Yen taken out of Japan * Average spending per visitor comes from the survey results

10. 10 Revision of compilation methodology (debit) Yen brought into and spent Number of visitors staying one year in Japan per visitor (D-H) * X or less (annual; previous year) Number of Japanese going overseas for one year or less (annual; previous year) X Number of Japanese going overseas for one year or less (in relevant month) * Average yen brought into and spent in Japan per visitor from abroad is “D- H” in survey results. D. Yen brought into Japan per visitor H. Yen taken out of Japan per visitor Formula 2.

11. 11 Chart 3. Comparison of compiled travel figures using the previous and new methods January – March 2003 (final) Previous method (a) New method (released figures; b ) (b) / (a) Credit9562,4422.6 Debit7,7108,9241.2 Travel (credit-debit) -6,754-6,482- 100 million yen

12. 12 Follow-up for further improvement 1 [Areas where further improvements are required] Yen brought into Japan per visitor as captured by the survey assumes a fixed value. - The amount, however, may fluctuate in the long run depending on (1) visitors’ incomes, (2) price levels in Japan, (3) foreign exchange rates, (4) prevalence of credit cards and so forth. Foreign currency cash withdrawn by Japanese travelers from CDs and ATMs situated abroad is not reflected in travel in BOP.

13. 13 Follow-up for further improvement 2 [Possible future actions] Conducting surveys on a regular basis (2nd survey will be conducted in 2005) Extending the target of survey to Japanese travelers overseas Extending the sample population

14. 14 Contact Hidetoshi Takeda (Mr.) Deputy Director, Balance of Payments Division International Department, Bank of Japan Tel : 81-3-3277-1381 (direct) E-mail : hidetoshi.takeda@boj.or.jp Ayako Funazaki (Ms.) International Department, Bank of Japan Tel : 81-3-3277-2930 (direct) E-mail : ayako.funazaki@boj.or.jp