The popular hot spring resort town of Hakone, Kanagawa Prefecture, is considering introducing the prefecture’s first lodging tax and hiking the bathing tax as tourist-related costs are putting a strain on its finances.
Experts in the east Japan town, which has a population of about 10,000, have been discussing how to secure new tourism revenues to host some 20 million visitors annually. The number of visitors temporarily declined amid the coronavirus pandemic but has since been rising — as have costs.
According to the Hakone Municipal Government, in addition to the maintenance and operation of tourist facilities, the cost of services that involve tourists even if only partially, such as garbage and sewage disposal and medical emergency services, is significant, exceeding the scale for the small town. In fiscal 2019, before the COVID-19 crisis, the town needed 2.36 billion yen (roughly $15.2 million), even with its revenue from the bathing tax.
The town’s pocketbooks are tight. Municipal tax revenues have been decreasing since peaking at 7.84 billion yen (approx. $50.4 million at today’s rate) in fiscal 1996 due to the prolonged economic slump.
Municipal tax revenues stood at 5.97 billion yen (roughly $38.3 million) in fiscal 2015, and so the town raised the property tax rate on owners of land and houses by 0.18% in fiscal 2016. Even so, the shortage of financial resources is apparently set to head into shaky territory due to the declining population and other factors.
In fiscal 2019, a nine-member panel of experts was established to study the possibility of new tourism revenue sources. Discussions were temporarily suspended amid the COVID-19 pandemic but resumed in October 2023.
One idea is to raise the bathing tax. The town has imposed a tax of 150 yen (about $1) for an overnight stay and 50 yen for a day trip on visitors taking hot spring baths. Hakone has maintained the No. 1 position in Japan in terms of both bathing tax revenue and the number of people taking hot spring dips since fiscal 1987, with revenues of some 620 million yen (approx. $4 million) in fiscal 2019. Raising the bathing tax would increase revenue, but there is a disadvantage that the use of the tax money is limited to purposes such as tourism promotion and the maintenance of firefighting facilities because it falls under the “special purpose tax” category.
Another idea discussed is the establishment of a lodging tax. Nine local bodies across Japan, including Tokyo and Osaka Prefecture, have introduced such a tax, and the city of Kyoto has set a range of 200 yen (about $1.30) to 1,000 yen (roughly $6.40) depending on the accommodation fee. With the consent of the Minister of Internal Affairs and Communications, the use of the tax money can be freely decided by ordinance. On the other hand, the dilemma is that the fees cannot be collected from day-trippers, who account for more than 70% of tourists in Hakone.
As an example of other local government initiatives, “Fujisan Conservation Donations,” which Yamanashi and Shizuoka prefectures have implemented to cover access to Japan’s tallest mountain, have also been discussed at the expert panel meetings. Revenues from the 1,000-yen-per-person donations are used for the maintenance of environmentally friendly toilets, among other purposes, in the two prefectures, but they are voluntary.
The direction of the discussions is not yet clear, but the study group will compile a report by September 2026. The town is keeping a watchful eye on the matter, with one official saying, “We would like to find the most desirable way to share the burden.”
