What: Japanese department stores report a sustained drop in tax-free sales and foreign tourist shopper numbers, with July figures down over 36% and average per-person spending falling 23.6% compared to 2024.

Why it is important: This sustained decline highlights the vulnerability of Japan’s department stores to shifts in tourist spending and underscores the need for diversified retail strategies beyond inbound luxury demand.

Tax-exempt spending by foreign tourists at Japanese department stores fell sharply in July, down 36.3% year-on-year, marking the fifth consecutive monthly decline. The number of foreign tourist shoppers also dropped 16.7%, while average per-person spending decreased by 23.6% to 84,000 yen. This downturn is not limited to July; since March, both tax-free sales and shopper numbers have consistently trended downward. The Japan Department Stores Association notes that the decline in tax-exempt shopping is not being offset by increased spending on non-exempt items, which also fell by over 40%. Despite a steady flow of inbound travelers, these figures suggest that the strategy of relying heavily on luxury-oriented foreign tourists is no longer as lucrative as in previous years. The data points to a broader shift in consumer behavior and highlights the need for Japanese department stores to diversify their approach and adapt to changing market conditions.

IADS Notes:

The sharp decline in tax-exempt spending by foreign tourists at Japanese department stores marks a significant shift in the sector’s fortunes. As reported by Japan Times in June 2025, tax-free sales dropped 40% year-on-year, with both average spend and shopper numbers falling, signaling a reversal from the record-breaking duty-free sales seen in 2024 . Mint and BoF in July 2025 highlighted how this downturn has led to underperformance in department store shares and exposed the risks of relying heavily on luxury tourism, as a stronger yen and weaker consumer confidence have dampened spending . Inside Retail’s July 2025 analysis described a post-boom correction, with department store sales down 7.3% and value-oriented retailers like Uniqlo and Muji thriving, underscoring the need for market adaptation . In response, retailers such as Matsuya Ginza have launched digital platforms and new service models to attract both domestic and international customers, as noted by Inside Retail in December 2024 and nippon.com in January 2025 . Japan Today in January 2025 and Inside Retail in April 2025 further revealed that while flagship stores in major cities have concentrated most of the growth, regional locations are stagnating, emphasizing the importance of diversified strategies and digital innovation for future resilience .

Foreign tourists spending at Japanese department stores is dropping rapidly