TOKYO/BEIJING -- The escalating row between Japan and South Korea over wartime labor issues and export controls has sunk the bilateral relations to perhaps its worst since the end of World War II. The foreign ministers meeting on Thursday in Beijing did little to advance any talks on either issue.
The rift is making a dent in tourism -- an increasingly important sector of the Japanese economy -- as well as calling the future of a key security agreement into question.
The number of South Korean tourists visiting Japan sank 7.6% year-on-year to 562,000 last month, Japan National Tourism Organization data released Wednesday shows.
The number marks the lowest level since September 2018. JNTO noted the cancellation of a number of group tours.
The drop-off stood in stark contrast to the number of visitors from China, which grew 19.5% to 1.05 million people, making July the single highest month on record, as tourists flocked to Japan for their summer holidays.
The 7.6% decline in South Korean tourists comes on top of a 5.6% drop in July last year, when torrential rain devastated western Japan, leading to many cancellations. It showed that the boycott of Japanese products such as clothes and beer have now spread to travel as well.
When inbound travel numbers are broken down by country and region, South Korean tourists rank second after Chinese visitors. Declines in visitors from that country can weigh on local economies that have thrived on the travel boom.
With a meeting Wednesday between the two sides' top diplomats seeming to bring the neighbors no closer to reconciliation, more South Koreans -- who make up a quarter of foreign visitors to Japan -- are likely to shun the country as a vacation destination.
In addition to the economic toll, the row is also driving a wedge into a partnership that plays a vital role in ensuring the security of East Asia.
The General Security of Military Information Agreement between Japan and South Korea is due for its automatic annual renewal in November. Saturday marks the deadline for either side to announce its withdrawal from the intelligence-sharing deal.
Yet when Japanese Foreign Minister Taro Kono broached the topic, counterpart Kang Kyung-wha said only that Seoul is "still considering" whether to extend it, according to the South Korean side.
The cagey response appears intended to pressure Japan into scaling back its export curbs by raising the prospect of scrapping the agreement. Tokyo has so far refused to compromise, insisting on treating the trade controls and the renewal of the military agreement as separate issues.
The uncertainty over the extension risks disrupting security cooperation among Japan, South Korea and the U.S.
North Korea's missile launches since May are believed to have included a new type of short-range ballistic missile that can fly at low altitudes and change course in-flight. Japan's missile defense systems struggle with low-flying projectiles, and this weakness will be exacerbated if the military agreement is terminated and Tokyo loses ready access to Seoul's intelligence-gathering capabilities.
Conversely, South Korea depends on Japan to track missiles flying beyond the Japanese archipelago. South Korean Defense Minister Jeong Kyeong-doo has acknowledged that Tokyo has shared information with Seoul on past North Korean nuclear tests.
The grim tourism data came on the heels of Korean Air Lines' decision on Tuesday to suspend service on six more routes to Japan, citing shrinking demand. Hiroshi Tabata, commissioner of the Japan Tourism Agency, said Wednesday that national tourism organization had postponed a planned joint promotional campaign with partners including South Korean carriers.
The drop in South Korean visitors is showing up in data on tourist spending. The Japan Department Stores Association reported Wednesday that while nationwide tax-free sales -- a proxy for purchases by foreign visitors -- rose 3.4% to 28.1 billion yen ($264 million) in July, sales to South Koreans slid 10%.
Japanese hotel reservations by South Korean users via travel agency JTB's website plunged by half year over year last month. Bookings are down by 70% for August and by 80% for September compared with this time last year. "The reduction in flights is probably a factor," a JTB representative said.
West Japan Railway saw a 40% drop in rooms occupied by South Korean customers last month at its 17 hotels around Japan, while Imperial Hotel Osaka experienced a 20% decline in reservations.
In Sapporo, normally a popular destination for South Korean visitors, hotels seeing a drop-off in reservations are cutting rates, leading to an intensifying price war, according to hotel operator Fujita Kanko.