(Jan 05): Duty-free sales at Japan’s leading department store operators fell sharply in December, highlighting how prolonged geopolitical tensions with China are weighing on the retail sector.
At Daimaru and Matsuzakaya stores of J Front Retailing Co, duty-free sales plunged 17% year-on-year, dragging overall sales down 1.9% for the month. Takashimaya Co said tax-free sales declined 11% as inbound spending slumped, partly due to Beijing’s advisory discouraging travel to Japan. The slowdown limited the company’s overall sales growth to 4.1% despite resilient domestic demand.
H2O Retailing Co said sales from Chinese customers fell about 40% last month due to flight cuts from China to Kansai International Airport near Osaka, pushing overall sales down 3.6%. Matsuya Co reported about an 11% drop at its flagship Ginza store last month, citing the absence of Chinese tourists. Isetan Mitsukoshi Holdings Ltd said duty-free sales across its domestic stores fell 14%, pulling total sales down 0.5%.
Chinese visitors have been a crucial driver of Japan’s economic recovery since borders reopened after the Covid-19 pandemic, contributing roughly a fifth of the nation’s ¥8.1 trillion tourism revenue. That reliance has now become a vulnerability, exposing retailers to shifts in Chinese travel trends as political frictions resurface.
Visitor growth from China slowed in November to its weakest pace in nearly four years, after Beijing curbed travel in response to Japan Prime Minister Sanae Takaichi’s remarks on Taiwan. China has also ordered airlines to reduce flights to Japan through March, a move that could spell more pain in the months ahead for Japanese retailers and the tourism industry.
Tourism remains one of Japan’s key growth engines, and a prolonged pullback risks denting corporate earnings and broader economic recovery. Japan could lose as much as ¥1.2 trillion in tourism revenue this year if travel restrictions persist, according to Hiromu Komiya, an economist at the Japan Research Institute.
See also: Japan seeks support as fears rise over China’s rare earth grip
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