The Importance of the U.S.-Japan Market

So which is it? Two weeks ago, Delta cited “softer than expected demand in Japan.” But last week, United said routes to Japan were just fine.

Soon, American, Hawaiian, Japan Airlines, and All Nippon will report their Q2 results, likely providing more clarity on trends in the giant U.S.-Japan market. Just how giant is it? Ranked by the number of seats scheduled in the past year, according to Diio Mi, Japan is the second largest overseas market from the U.S., behind only the U.K. Yes, the U.S.-Japan market (by this measure anyway) is larger than the U.S.-Germany market. It’s larger than the U.S.-China market. And it’s larger than the U.S.-France market.

Importantly though, the U.S.-Japan market is really two markets, each with distinct demand characteristics. On one hand, there’s the Japan market to Hawaii and Guam, consisting of mostly Japanese tourists and accounting for more than 40% of all seats between the two countries. On the other hand is the Japan-U.S. mainland market, accounting for the other 60%. That covers flights to most major U.S. hubs and features lots of premium business traffic, notably from industries like finance, auto manufacturing, and information technology. Many of the cars on American roads are Toyotas, Hondas, and Nissans. Most of the planes flown by Japanese airlines are Boeings. And there lies a hint at just how important the economic relationship is between the U.S. and Japan, bitter foes during World War II but close allies ever since. Today, the U.S. and Japan are the largest and third-largest economies in the world, respectively.

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