Will Kyoto go bankrupt? Japan’s ancient capital swims in debt as coronavirus keeps foreign tourists away

The city of history and culture used to have millions of annual visitors, but is now struggling as two years’ lost tourism revenue adds to its mountain of debt

Kyoto’s mayor plans to restore fiscal health by cutting costs and asking the city’s many temples, which are currently exempt from taxation, to contribute

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A near-deserted snow-covered street is seen in Kyoto on January 14. Tourists used to flock to the city in their droves, but not amid the pandemic. Photo: Kyodo

Published: 8:00am, 31 Jan 2022Updated: 9:36am, 31 Jan 2022

Kyoto, the ancient Japanese capital that tourists flocked to in their millions pre-pandemic, is in danger of going broke as it struggles to offset billions of dollars in debt racked up through big-budget infrastructure projects with persistently low tax receipts and millions in lost tourism revenue.

Just a few short years ago, the city synonymous with Japan’s history, culture and traditional architecture would play host to as many as 50 million domestic and international visitors annually.

But bereft of big-spending foreign tourists as the country’s borders remain firmly closed to overseas travellers amid the coronavirus pandemic, it is now staring down the barrel of a financial crisis that Kyoto Mayor Diasaku Kadokawa warned last year raises “the prospect of bankruptcy within a decade”.

Heian Jingu shrine in Kyoto. The city’s many religious sites are exempt from taxation, angering those who think they should contribute more. Photo: Kyodo

This financial year, which ends on March 31 in Japan, it is estimated that the city will have haemorrhaged around 50 billion yen (US$433 million) – another huge net loss to add to its 860 billion yen (US$7.5 billion) mountain of accumulated debt.

Few argue that the absence of foreign tourists is the most immediate cause of Kyoto’s financial woes, but other factors are also at play – costly tax exemptions, wasteful government spending and loss-making rail infrastructure not least among them, according to critics.

Temple exemptions

Avi Lugasi, an Israeli who has lived in Kyoto for 27 years and operates the Windows to Japan travel agency, identified a long-standing tax break enjoyed by Kyoto’s many religious sites as a major reason for the parlous state of the city’s coffers.