inbound tourist meaning

What is Inbound and Outbound Tourism?

by Hammad Ur Rehman | Oct 25, 2021 | Travel Guide | 6 comments

Don’t you just love traveling around the world and exploring different places? Staying or visiting different countries or states for the sake of fun-filled holidays or work-related visits, are termed tourism. Tourism can be of two types, Inbound tourism or Outbound Tourism. Now the question arises that what is inbound and outbound tourism?

Well, the difference between the two is just a matter of perspective, that is, from where and how you see it. In simple words, if we look from the USA tourism perspective, the outbound tourism would be Robert going to Pakistan, while inbound tourism would be, Ali coming to the USA. Similarly, if we look from a Pakistani tourism perspective, the outbound tourism would be Ali going to the USA, and the inbound tourism would be, Robert coming to Pakistan.

Let’s move on and further elaborate on these two types of tourism.

What is Inbound tourism?

Inbound tourism is economically significant for a country. The tourist countries economically rely on the inbound visitors to drive their maintenance, growth, and development.

What exactly is inbound tourism? In easy words, you can call it incoming tourism. Let’s move further to see the definitions, meanings, significance, drawbacks, and examples of inbound tourism.

Definition of inbound tourism

When someone travels to a country, other than their own country, for tourism, this is called inbound tourism.

Inbound tourism is frequently influenced by certain factors like:

• Season or Weather
• Public holidays
• School’s summer or winter vacations

According to WTO (World Trade Organization) and UN (United States Nation), inbound tourism can be defined as follows:

“ The act of traveling to another country for not more than one consecutive year for leisure, business, or other purposes .”

Importance of inbound tourism

Through foreign exchange, tourism may bring a lot of wealth into a country. This is especially advantageous in places where the local exchange rate is cheaper as compared to visitors’ native currency. Therefore, inbound tourism has high significance in many countries mainly because of the benefits it provides economically.

Mostly, countries target specific nations for advertising and promoting their inbound tourism. For instance, in today’s era, Chinese people tend to spend more on traveling every year as compared to any other nation, plus, the greatest outbound tourism markets are also produced by China. Therefore, Chinese inbound tourists are highly in demand by many tourist countries.

Drawbacks of inbound tourism

Depending entirely on income from the inbound tourism may cause problems. There are many places like Maldives, Goa, Fairy meadows, Greece, etc., whose economies rely on tourists from other countries.

The primary drawback of inbound tourism is that the place is at the hands of the transportation network. Many tourism industries have been ravaged as a result of airlines ceasing to operate a specific route. Cultural conflicts can also take place due to inbound tourism.

Some other disadvantages of inbound tourism include:

• Disposal, contamination, and emissions are all on the rise.
• Environmental and aquatic habitats are being physically harmed on a daily basis.
• Inappropriate buildings are being built next to historical places and monuments.
• Plenty of resources are being used up.
• Building infrastructure and utilization of land.

Inbound Tourism examples

Now that we have a basic understanding of inbound tourism, let’s look at some practical examples.

If a person from one country travels to another country for tourism, then it’s an inbound tourist. For example, Ali is having a summer break from his university and wants to go abroad. So, he decides to go for tourism to France and enjoys his summer break there. This is an example of inbound tourism because Ali is coming from Pakistan to France for his vacation, and it is a tourist activity for him.

Likewise, Robert is also having a summer break from his school and wants to visit another country. So, he decides to go for tourism to Pakistan and enjoys his summer break there. This is also an example of inbound tourism because Robert is coming from America to Pakistan for his vacation, and it’s a tourist activity for him.

Generally, some of the countries that are renowned for inbound tourism include Maldives, Goa, Greece, etc.

What is outbound tourism?

Leaving your homeland for the sake of gaining international tourism experience has wide importance for many countries.

Let’s jump into detail and find out what is outbound tourism, how do we define it, the importance of outbound tourism has it got any disadvantages, and a few examples of outbound tourism.

Definition of outbound tourism

When a tourist travels or visits outside his or her country for the sake of tourism, but not for more than a year. This type of tourism is called outbound tourism.

The WTO (World Trade Organization) and UN (United States Nation) define outbound tourism as follows, “The act of leaving your home country internationally for not more than one consecutive year for leisure, business or other purposes.”

Throughout the years, the market for outbound tourism has grown significantly. However, different regions of the world have different growth rates of the tourism market, but the factors leading to progress are similar.

Importance of outbound tourism

Outbound tourism also has a positive impact on the economy of the county. It provides economic improvements in a variety of industries such as education, healthcare, business, and retail, etc.

For example, the more people travel to foreign nations, the more their demands for products and services increase. Thus, it is a source of economic growth and prosperity for many countries.

This direction of tourism helps in increasing employment opportunities, foreign currency earnings, and trade balance. Thus, it is a source of economic growth and prosperity for many countries.

Within a very short period, China has become the largest source of outbound tourists. The increasing number of Chinese outbound tourists opens the gate of opportunities for tour group operating companies, hotels, national government ad retailers.

Drawbacks of outbound tourism

Apart from the advantages, there are a few disadvantages of outbound tourism as well. These drawbacks include the following:

• Many outbound tourists spend a huge amount of money on international chains like KFC fast-food chains, which reduces the positive effects of tourism as the tourist is using money that has been taken out of his residence.
• ·Sometimes, a country relies far too much on its outbound tourism market. For example, some Caribbean island nations depend on money from tourists to fund their entire economy and government, but this is a risky move as the tourism market is highly inconsistent, and a small incident can lead to a large drop in tourism.

Outbound tourism examples

Let’s go through an example of outbound tourism from the USA point of view:

John is a US citizen and has a passport to the USA. He wants to go for tourism so he can explore the international culture and experience new things. So, he goes for a tour to Spain with his family and friends. This is an example of outbound tourism because John has applied for a tourist visa and is traveling outside his country, USA.

Another example of outbound tourism from Spain’s perspective:

Robert is a tourist from Spain who wants to go for tourism in the USA, but he has no American visa. So, he goes for a tour to the UK with his family and friends. This is an example of outbound tourism because Robert has applied for a tourist visa and is traveling outside his country, Spain.

What is domestic tourism?

Until here, we discussed international inbound and outbound tourism. However, tourism can also be domestic. Now you would want to ask what is domestic tourism ?

Well, it’s very simple. In domestic tourism, the tourist visits different regions, cities, or towns of the same country where he/she resides. In easy words, domestic tourism is vacations spent within the same country you live in.

Let me give you an example of domestic tourism, Sarah lives in California, USA, and for her vacations, she visits Pennsylvania, USA.

Domestic tourism is used by the government to eradicate poverty, economic development, production of employments, infrastructure upgrades, reduce the load from overcrowding. For instance, If the government of California promotes domestic tourism within its state, then more people would come to visit various places in California, which are less popular, and it would boost the economy of California by providing employment opportunities to the people.

Also Learn: Domestic vs International Travel

Final Thoughts

In general, tourism contributes significantly to international trade and the provision of job opportunities in many nations. I hope this article has provided you with a clear picture of what are the types of tourism and why are they significant. All types of tourism are important for the economic growth of any nation.

Check our article on: What is FIT And GIT in The Tourism

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Understanding Inbound Tourism: A Comprehensive Guide

Welcome to the world of travel and tourism, where the concept of inbound tourism plays a crucial role in shaping the industry. In this comprehensive guide, we will delve deep into the definition, significance, trends, and impact of inbound tourism on destinations around the globe. Whether you are a seasoned travel professional or an enthusiastic traveler, understanding inbound tourism is essential to grasp the dynamics of the travel industry.

What is Inbound Tourism?

Inbound tourism refers to the act of traveling to a destination by individuals who are not residents of that destination. In simpler terms, it involves tourists visiting a country or region that is different from their place of origin. This form of tourism encompasses a wide range of activities, including sightseeing, cultural exploration, leisure travel, business trips, and more.

One of the key characteristics of inbound tourism is that it involves foreign visitors who contribute to the economy of the destination they are visiting. These visitors bring in revenue through various means such as accommodation, dining, transportation, shopping, and other tourism-related activities. Inbound tourism is a significant driver of economic growth and development for many countries, making it a vital component of the global tourism industry.

The Significance of Inbound Tourism

Inbound tourism plays a pivotal role in the economic, social, and cultural development of destinations worldwide. Here are some key reasons why inbound tourism is significant:

• Economic Impact: Inbound tourism generates revenue for the host destination through spending on accommodations, food, transportation, and other services. This revenue contributes to the local economy, creates jobs, and supports small businesses.
• Cultural Exchange: Inbound tourism promotes cultural exchange and understanding between different countries and cultures. Tourists have the opportunity to immerse themselves in the local customs, traditions, and way of life, fostering mutual respect and appreciation.
• Infrastructure Development: The influx of foreign tourists often leads to improvements in infrastructure such as airports, roads, hotels, and attractions. These developments benefit both tourists and local residents, enhancing the overall quality of life in the destination.
• Promotion of Heritage and Natural Resources: Inbound tourism can help raise awareness about the importance of preserving heritage sites, natural landscapes, and wildlife. Tourists often visit destinations to experience their unique cultural and natural attractions, creating incentives for conservation efforts.

Trends in Inbound Tourism

The landscape of inbound tourism is constantly evolving, influenced by changing consumer preferences, technological advancements, global events, and economic factors. Here are some notable trends shaping the world of inbound tourism:

• Emerging Destinations: As travelers seek new and authentic experiences, emerging destinations are gaining popularity among tourists. These destinations offer unique attractions, cultural heritage, and natural beauty, attracting visitors looking for off-the-beaten-path experiences.
• Digital Transformation: The rise of digital platforms and online booking systems has transformed the way travelers research, plan, and book their trips. Online travel agencies, review websites, and social media influencers play a significant role in shaping travelers' decisions and preferences.
• Sustainable Tourism: There is a growing emphasis on sustainable tourism practices that minimize the environmental impact of travel and support local communities. Eco-friendly accommodations, responsible tour operators, and conservation initiatives are becoming increasingly important for travelers seeking ethical travel experiences.
• Personalized Experiences: Travelers are increasingly looking for personalized and customized experiences that cater to their interests and preferences. From tailored itineraries to unique accommodations, the demand for personalized travel experiences is driving innovation in the tourism industry.

The Impact of Inbound Tourism

The impact of inbound tourism extends beyond economic benefits, influencing various aspects of destination development and community well-being. Here are some key areas where inbound tourism has a significant impact:

• Employment Opportunities: Inbound tourism creates job opportunities in sectors such as hospitality, transportation, retail, and tour operations. These jobs provide income for local residents and contribute to the overall prosperity of the destination.
• Cultural Preservation: Tourism can help preserve and promote the cultural heritage of a destination by showcasing traditional crafts, performing arts, cuisine, and festivals. Cultural tourism initiatives support local artisans, performers, and cultural institutions, preserving traditions for future generations.
• Infrastructure Development: The demand from tourists drives investments in infrastructure projects such as airports, roads, public transportation, and tourist facilities. These developments benefit both tourists and local residents, improving accessibility and quality of life.
• Environmental Conservation: Sustainable tourism practices promote the protection of natural resources, wildlife habitats, and ecosystems. Responsible tourism initiatives aim to minimize the environmental footprint of travel activities and raise awareness about conservation efforts.

Inbound tourism is a dynamic and multifaceted aspect of the global travel industry, influencing economies, cultures, and communities around the world. By understanding the definition, significance, trends, and impact of inbound tourism, stakeholders in the travel industry can make informed decisions and contribute to sustainable tourism development. As the world continues to evolve, inbound tourism will play a vital role in shaping the future of travel and creating memorable experiences for travelers worldwide.

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What is Inbound Tourism? And How Our API Solution Boosts It

Inbound tourism, a key driver of economic growth and job creation, has become essential for many countries worldwide. In this article, we will explore what is inbound tourism and how embracing an API platform like Travel Trade Ready can help tourism organisations boost their visitor numbers and revenue.

What is Inbound Tourism?

Inbound tourism involves the various pursuits and events experienced by tourists visiting a foreign country for leisure, work, or other reasons. This includes an array of travel adventures, such as cultural excursions, thrilling expeditions, high-end retreats, and professional gatherings. As a crucial aspect of the worldwide tourism sector, inbound tourism substantially impacts a nation’s economy, job market, and infrastructure growth.

As global tourism sees the number of international visitors return to form, understanding the answer to “ what is inbound tourism ?” and identifying creative methods to improve it has emerged as a primary objective for tourism agencies across the globe.

The Importance of Inbound Tourism

The definition of inbound tourism is international traffic entering a country – so, for example, any non-British citizen entering the UK for the specific purpose of tourism.

Inbound tourism is a significant driver of economic growth, offering multiple benefits to countries and local communities. The influx of international visitors creates employment opportunities, supports local businesses, and generates tax revenue for governments. Additionally, inbound tourism promotes cultural exchange and global understanding, fostering positive relationships between countries and their citizens.

As the global travel market continues to expand, understanding what is inbound tourism and how to increase it is critical for tourism organisations aiming to thrive in this competitive industry.

What is Inbound Tourism? – Travel Trade Ready

The importance of an api platform in inbound tourism.

An API (Application Programming Interface) platform is a game-changer in the travel industry. By embracing an API platform, such as the solution offered by Travel Trade Ready , tourism organisations can streamline their operations, increase data efficiency, and ultimately attract more inbound tourists. Some of the key benefits of using an API platform in inbound tourism include:

Real-Time Availability and Pricing

API platforms offer real-time availability and pricing information, enabling travellers to make informed decisions and tourism organisations to optimise their revenue management strategies.

Enhanced Customer Experience

Via the API methodology of integrating various travel services and offering personalised recommendations, an API platform can significantly enhance the overall customer experience, which is crucial for attracting more inbound tourists and fostering repeat business.

The Benefits of Travel Trade Ready API for Tourism Organisations

Travel Trade Ready is an innovative API platform designed specifically for the travel industry. It offers a wide range of features and benefits that can help tourism organisations increase their inbound tourism numbers. Some of the key advantages of using Travel Trade Ready API include:

Global Distribution

One of the key benefits of the Travel Trade Ready API is its ability to connect tourism organisations with travel trade partners worldwide. By establishing these connections, organisations can expand their global reach and promote their offerings to a larger audience. This increased visibility is crucial in driving inbound tourism growth, as international travellers are more likely to book trips when they have easy access to information and booking options.

Travel Trade Ready API enables tourism organisations to tap into a global network of travel agents, tour operators, and online travel agencies, increasing their visibility and reach to potential customers worldwide.

Advanced Booking Management

Another important aspect of what is inbound tourism and how to increase it involves streamlining the booking process for international travellers. The Travel Trade Ready API simplifies this process by allowing travel trade partners to access real-time availability, pricing, and product information. This enables them to offer seamless booking experiences for their customers, making it easier for travellers to plan and book trips to your destination.

With Travel Trade Ready API, tourism organisations can manage bookings, cancellations, and modifications in real-time, ensuring efficient operations and a smooth customer experience.

Enhancing Your Online Presence

In today’s digital age, having a strong online presence is essential for attracting inbound tourism. The Travel Trade Ready API helps organisations achieve this by providing high-quality, up-to-date content for their online platforms. This includes detailed product descriptions, images, and videos, ensuring that your offerings are presented in the best possible light to potential visitors.

Comprehensive Inventory

Travel Trade Ready API provides access to an extensive inventory of travel products and services, including accommodation, transportation, tours, and activities. This allows tourism organisations to offer a diverse range of options to their customers, catering to various preferences and budgets, at a far lower cost than traditional networking.

Customisable Solutions

Travel Trade Ready provides dedicated customer support to assist with any technical issues or queries, ensuring a seamless experience for both tourism organisations and their customers.

In conclusion, understanding what is inbound tourism and implementing an API platform like Travel Trade Ready can significantly boost a tourism organisation’s performance and competitiveness in the global market. By simplifying the booking process, providing real-time availability and pricing information, and offering a wide travel service range, Travel Trade Ready can help attract more inbound tourists and drive economic growth in the tourism sector. Don’t miss out on the opportunity to leverage this innovative solution to take your tourism organisation to new heights – check out our demo website section today.

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Inbound tourism

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• Shalini Singh 3  

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UNWTO defines inbound tourism as all incoming nonresident arrivals to a targeted destination . Evidentially, the literature applies and reflects this interpretation in discourses pertaining to international tourists. The foremost choice of travel mode among inbound tourists is by air, closely followed by road, and, peripherally, by water and rail . While their primary purposes are leisure , recreation , and holidaying, secondary reasons include health, religion, and visiting friends and relatives. Business, conference, and profession-related arrivals account for a further one eighth of global inbound traffic (UNWTO 2013 ). To maximize their use of time and money, inbound tourists prefer all-inclusive packages to multiple destinations. The innumerable options and preferences lend to two forms of inbound tourism: institutionalized (group/individual mass, psychocentric) and noninstitutionalized (informal, drifter, allocentric).

The importance of inbound tourism is acknowledged in the world’s...

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Cortes-Jimenez, I., and M. Pulina 2010 Inbound Tourism and Long-run Economic Growth. Current Issues in Tourism 13:61-74.

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Dwyer, L., and P. Forsyth 1993 Assessing the Benefits and Costs of Inbound Tourism. Annals of Tourism Research 20:751-768.

Sahli, M., and J. Nowak 2007 Does Inbound Tourism Benefit Developing Countries? A Trade Theoretic Approach. Journal of Travel Research 45:426-434.

UNWTO 2013 Tourism Highlights. Madrid: World Tourism Organization.

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Singh, S. (2016). Inbound tourism. In: Jafari, J., Xiao, H. (eds) Encyclopedia of Tourism. Springer, Cham. https://doi.org/10.1007/978-3-319-01384-8_563

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UN Tourism Data Dashboard

The UN Tourism Data Dashboard – provides statistics and insights on key indicators for inbound and outbound tourism at the global, regional and national levels. Data covers tourist arrivals, tourism share of exports and contribution to GDP, source markets, seasonality and accommodation (data on number of rooms, guest and nights)

Two special modules present data on the impact of COVID 19 on tourism as well as a Policy Tracker on Measures to Support Tourism

The UN Tourism/IATA Destination Tracker

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UN Tourism Tourism Data Dashboard

• International tourist arrivals and receipts and export revenues
• International tourism expenditure and departures
• Seasonality
• Tourism Flows
• Accommodation
• Tourism GDP and Employment
• Domestic Tourism

International Tourism and COVID-19

• The pandemic generated a loss of 2.6 billion international arrivals in 2020, 2021 and 2022 combined
• Export revenues from international tourism dropped 62% in 2020 and 59% in 2021, versus 2019 (real terms) and then rebounded in 2022, remaining 34% below pre-pandemic levels.
• The total loss in export revenues from tourism amounts to USD 2.6 trillion for that three-year period.
• International tourist arrivals reached 88% of pre-pandemic levels in January-December 2023

COVID-19: Measures to Support Travel and Tourism

What Is Inbound Tourism With Example?

By Michael Ferguson

Inbound tourism is a type of travel where a person or group of people visit a country that is not their home country. The purpose of inbound tourism can vary, from leisure travel to business travel, but the common denominator is that the traveler is visiting a foreign destination.

One example of inbound tourism is when a family from Japan decides to take a trip to New York City. They book flights and accommodations in New York, and plan their itinerary around visiting popular tourist attractions such as the Statue of Liberty, Central Park, and Times Square. During their visit, they may also try local cuisine and shop for souvenirs to take back home.

Another example of inbound tourism could be when a group of international business travelers come to attend a conference or meeting in a different country. They may stay in hotels near the conference venue and spend their free time exploring the local culture and attractions.

Inbound tourism can have significant economic benefits for the destination country. Tourists bring in revenue through spending on accommodation, food and beverage, transportation, shopping, and other activities. This can help boost local businesses and create jobs.

To attract more inbound tourists, destinations often invest in marketing campaigns to showcase their unique culture, history, natural beauty or landmarks. They may also offer incentives such as visa exemptions or discounts on tourist attractions.

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Inbound tourism numbers hit record high, with Japan set to achieve 2025 goal

Japan is on course to achieve a government goal of topping the pre-pandemic figure of 32 million annual foreign visitors by 2025, with the January-March quarter seeing a record 8.56 million, data from the Japan National Tourism Organization showed Wednesday.

Foreign travelers also spent ¥1.8 trillion during the January-March period, which translates to about ¥210,000 per person per stay. The total marks the highest figure on record as more people stay longer in Japan thanks to the weaker yen.

Japan also welcomed a record 3.08 million foreign visitors in March, surpassing the previous high of 2.99 million from July 2019, JNTO said.

The spike in numbers can be attributed to the Easter holiday in March, when there were more travelers from Western countries such as Australia and the United States, as well as the attraction of the cherry blossom season.

In 2023, about 25 million visitors came to Japan, spending a record ¥5.3 trillion, with a single tourist on average spending around ¥210,000 per stay.

The figures have already surpassed a target — set at ¥5 trillion total and ¥200,000 on average — that had been fixed for 2025 in the government’s tourism strategy and goals, which were drafted in 2023.

However, other goals in the plan have yet to be reached, and the government held the ministerial meeting on Wednesday evening to discuss their efforts and further plans.

For instance, one of the goals set in the basic plan is to establish sustainable tourist spots, or destinations that can continue to flourish and be self-sustainable in terms of financial, social, cultural and natural resources, with minimum impacts on the environment.

As of November, the latest figure available, there were only 31 areas that have set up such projects, well short of the government goal of 100 by 2025. The tourism agency is offering support to various local governments and destination marketing organizations to encourage more to join.

Another issue that remains is the fact that tourists still tend to congregate in urban areas. In 2023, around 70% of all visitors stayed in the three metropolitan cities of Tokyo, Osaka or Kyoto, or areas surrounding the capital such as Chiba and Kanagawa prefectures. The figure was just over 60% prior to the pandemic.

"I think the potential of rural areas is truly limitless — and we are yet to see this potential fully flourish," said Ichiro Takahashi, the head of Japan Tourism Agency. "While there is a trend of uneven distribution in the three major metropolitan areas, we would like to especially strengthen our efforts to attract visitors to these rural regions."

Meanwhile, outbound tourism remains low compared to inbound arrivals, mostly due to the weak yen and high prices abroad. In March, about 1.22 million people visited foreign countries from Japan, around 60% of the figure during the same period in 2019.

In 2023, the figure was 9.62 million, less than half of the amount recorded in 2019.

However, domestic travel through 2023 almost rebounded to 2019 levels, and individuals spent 17.8% more on average per person. The total consumption amount was ¥21.9 trillion, approaching the goal of ¥22 trillion set by the government for 2025.

Staff writer Gabriele Ninivaggi contributed to this report.

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It’s not just investors watching the Fed: Central bankers across Southeast Asia are trying to time rate cuts to ensure their currencies don’t collapse

As 2024 began, Fed watchers thought it was a matter of when, not if, the U.S. central bank would cut interest rates. Four months into the year, most aren’t quite so optimistic : The Federal Reserve now is signaling that it’s in no rush to cut rates, thanks to a more resilient than expected U.S. economy and “sticky” inflation. 

But analysts and investors aren’t alone in trying to predict what the Fed will do: Central bankers around the world, including Asia, are also closely watching the Federal Reserve to gauge their own interest rate decisions—to cut, hold steady, or even to hike rates.

In the most recent example of this delicate dance, Bank Indonesia, that country’s central bank, surprised analysts on Wednesday when it raised a key interest rate by 25 basis points to 6.25%, in an effort to strengthen the rupiah, Indonesia’s currency, which has been stumbling against the strength of the dollar. Only six of 35 economists polled by Reuters predicted the rate hike, the first since October.

Emerging markets, like Indonesia and those throughout Southeast Asia, are in a bind. Cutting interest rates would alleviate pressure on the economy, lower borrowing costs, and spur growth. But cut too early—particularly if the Fed keeps things “higher for longer”—and capital outflows caused by investors searching for higher rates could lead to a weaker currency. 

In fact, the current strength of the U.S. dollar means that we aren’t going to see rate cuts in Asian markets anytime soon, says Jingyi Pan, an economics associate director of the PMI (Purchasing Managers’ Index) team at S&P Global Market Intelligence.

“Central banks in Asia are generally reluctant to see their domestic currency fluctuate significantly against other currencies, especially the U.S. dollar, and may therefore be less keen to move ahead of the Fed,” she says.

Cut, hold steady, or hike?

Higher U.S. interest rates tend to lead to a stronger dollar, as investors move money to the country in search of higher returns on bonds and other interest-rate products. The added demand leads to a strengthening dollar.

Central banks around the world thus are now finding that they need to hold or raise their own interest rates in order to avoid capital outflow and support their own currencies. A weaker currency makes essential imports like food and energy more expensive, worsening inflation.

On Wednesday, Perry Warjiyo, governor of Indonesia’s central bank, said the country’s surprise hike to its key interest was meant to “strengthen the stability of the rupiah exchange rate.” The Indonesian rupiah has fallen close to 5% against the U.S. dollar this year, even after accounting for Wednesday’s rate decision. 

And it’s not only the Indonesian central bank that’s paying attention to pressures from the dollar.

The Thai central bank has held its key interest rate steady at 2.5%, despite calls for rate cuts by Prime Minister Srettha Thavisin, who points to slower growth in Southeast Asia’s second-largest economy in comparison with its regional peers. “Vulnerable groups like SMEs [small and midsize enterprises] have a problem with a high interest rate,” he said in a recent interview with reporters. 

Yet cutting rates could be risky, as it could lead to further weakening of the baht. The baht has slipped around 8% against the U.S. dollar this year. 

Snubbed by the central bank, Srettha asked Thailand’s major financial institutions to lower rates instead. On Thursday, four major Thai banks agreed to temporarily lower borrowing costs after their CEOs met with the Thai prime minister. 

The strong U.S. dollar is also pressuring the Malaysian ringgit and the Philippine peso; both Southeast Asian central banks have so far maintained their benchmark interest rates.

The Philippine central bank previously signaled that it might cut rates later this year or early next year—yet Ralph Recto, the country’s financial secretary, warned that the Philippines might maintain its benchmark rate of 6.5% if the peso weakens past its current record low of 59 per dollar. On Thursday, Recto told Bloomberg that the peso’s slump is unlikely to spur the central bank to raise its key interest rates from a 17-year high at this time.

Elevated U.S. interest rates and a strong U.S. dollar also affect trade returns. Pan of S&P notes that Asia markets, excluding Japan, have remained relatively subdued this year, despite S&P’s PMI surveys showing positive economic performance. Businesses in the region are reporting rising input costs as their local currencies slide against the dollar. (Commodities are most often traded in dollars, meaning a strong greenback would raise costs for many companies.)

South Korea and Japan

It’s not just Southeast Asia that’s feeling the heat of the strong dollar. 

South Korea, which raised interest rates before the U.S. central bank, has so far kept its rates steady even as businesses struggle with high borrowing costs. The Bank of Korea has maintained its key interest rate at 3.5% since early last year.

Still, the won has slipped by over 5% against the dollar this year. Last week, Rhee Chang-yong, the Bank of Korea’s governor, said the country was ready to “ deploy stabilizing measures ” to support the won. 

Japan has also seen a sharp depreciation of the yen against the dollar. Japan’s currency hit its lowest level in over three decades on Wednesday, at 155 versus the dollar. 

Japan’s companies have traditionally supported a weak yen, as it makes exports cheaper overseas. Inbound tourism to Japan has also surged, thanks to a weak yen. 

But firms are now warning that the yen might be too weak, sending input prices higher and worsening inflation in the country. In a conversation with reporters, Japan Airlines CEO Mitsuko Tottori suggested that business leaders would be more comfortable with an exchange rate of around 130 yen to the U.S. dollar. 

Japanese officials have said they’ll step in to support the yen if the currency depreciates too quickly. Japan intervened in foreign exchange markets three times in 2022 to prop up its currency. 

Last week, Japan, South Korea, and the U.S. released a statement that acknowledged the two Asian countries’ “serious concerns” about the “recent sharp depreciation” of their currencies. 

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