Boom in tourists coming to Japan to buy luxury goods

A shopping boom among tourists is helping to drive record sales at Japanese stores. A weak yen boosts sales despite a lackluster number of Chinese tourists, according to Nikkei Asia.

Buy branded goods

According to November 2023 figures released by the Japan Department Stores Association, monthly duty-free sales hit a record high of 39.49 billion yen ($279 million) thanks to foreign tourists due to the weak yen, 2.3 times higher than the same month last year.

Takashimaya recently revised up its total operating income forecast for the fiscal year through February on strong spending by overseas tourists. The company expects a record net income of 30 billion yen, up 7.8 percent from the previous fiscal year.

Tourists are buying luxury goods from brands like Louis Vuitton, Chanel and Hermes because “the weak yen makes it seem like a bargain,” according to a Takashimaya spokesman. Foreign visitors also don’t have to pay Japan’s consumption tax.

Isetan Mitsukoshi Holdings said its duty-free sales hit a record high in November 2023 after also rising in October 2023, with particularly high consumer interest in luxury handbags, jewelry and watches.

As of mid-December 2023, Isetan Mitsukoshi Holdings' duty-free sales are on track to surpass those from November 2023. The company forecasts a net profit of 37 billion yen for the fiscal year ending in March.

Chinese tourists return slowly

According to the Japan National Tourism Organization, the number of tourists to the country in November 2023 was 2.44 million, up 2.6 times from a year earlier and exceeding 2 million for the sixth consecutive month. The number of tourists from January to November 2023 was 22 million.

Figures show that the number of tourists from 13 countries and territories - including South Korea, Taiwan, Singapore, Vietnam, Australia and the US - hit a record high in November 2023. On the other hand, Chinese visitors from January to November 2023 was 2.11 million, down 76.2% compared to the same period in 2019 (8.88 million).

Preliminary figures released by the government's Japan Tourism Agency showed foreign tourist spending reached 1.39 trillion yen in the July-September period, up 17.7 percent from the same period in 2019.

For Takashimaya, Chinese tourist spending accounted for 46.1% of total domestic sales between March and November 2023, a sharp decline from the pre-pandemic level of nearly 80% in 2019.

According to a Takashimaya spokesman, there has been an increase in tourists from other parts of Asia - such as Singapore, South Korea, Hong Kong and Taiwan - and a rise in younger consumers.

While individual tourists have returned, group tourists from China have not returned as expected, the spokesman said, citing political factors such as Japan's discharge of treated wastewater from the Fukushima Daiichi nuclear power plant into the ocean.

Keiji Kanda, senior economist at Daiwa Institute of Research, said that in terms of the increase in inbound tourism, “the impact of the weak yen is quite large.” The yen fluctuated around a 33-year low in 2023.

“Many things in Japan have become cheaper, making it easier for tourists to buy,” Kanda told Nikkei Asia. Personal spending has increased as “tourists’ budgets increase when converted to yen.

However, the return of Chinese tourists remains unclear. Mr. Kanda noted that the expected recovery in group tourism, which is set to resume in August 2023, has been affected by Japan’s decision to release treated wastewater from the Fukushima nuclear power plant later this month. Mr. Kanda believes the impact of the release will eventually subside and expects a recovery in Chinese tourists.

Matsuya Ginza shopping mall recently introduced a digital concierge service on China's WeChat messaging app.

Continued growth in tourist spending may depend on the yen remaining low. “[We believe] the number of foreign tourists will continue at this level, but with a higher yen, growth may slow down,” a Takashimaya spokesperson noted.