However, the slide in the Japanese currency - which hit a fresh 24-year low against the dollar on Thursday, prompting the government to intervene - could lead to the low-cost airline subsidiary of ANA Holdings Inc raising prices, chief executive Takeaki Mori added.

Prime Minister Fumio Kishida is widely expected to announce later on Thursday a further easing of Japan's COVID-19 infection border controls, which Mori said will be key to fostering a recovery in the nation's travel sector.

"I think demand will see an explosive return back to life from the moment the Japanese government eases entry restrictions further," Mori told Reuters on Thursday.

Japan has maintained some of the strictest border measures among major economies over the course of the pandemic, effectively blocking entry to visitors for two years until it started a gradual reopening in June.

Yen weakness will also make Japan a more affordable destination for travellers, Mori said. As the yen slides and inflation pressures mount, Peach may have to follow competitors in raising prices, he added however.

For now, the company's airplane lease fees are hedged against weakness in Japan's currency, but the outlook from next year is less certain, he said. "We are wondering what to do about hedging in the next fiscal year and beyond," Mori said. "The depreciation of the yen has led to very high fuel prices, which has a very big impact because it makes up the bulk of our costs."

(Reporting by Rocky Swift; Editing by Jan Harvey)

By Maki Shiraki and Rocky Swift