What: March saw Japanese department stores achieve their third consecutive month of growth, fueled by increased luxury sales and a recovery in spending from international tourists, even as supply risks persist.

Why it is important: This growth signals the effectiveness of Japanese department stores’ efforts to diversify their customer base and adapt to changing tourist demographics.

Japanese department stores recorded their third consecutive month of sales growth in March, reaching over 507 billion yen, or approximately $3.2 billion, a 3.2% year-on-year increase on a comparable basis. This positive trend was driven by robust demand for luxury items such as watches and jewelry, as well as a notable rebound in tax-free purchases by foreign visitors, which rose 5.2% to around $300 million. The recovery in tourist spending was particularly significant given the ongoing decline in Chinese visitors, with increased arrivals from Taiwan, South Korea, and Southeast Asia compensating for this shortfall. The weak yen further boosted per capita spending by about 20% year-on-year, enhancing the appeal of Japanese retail for international shoppers. Despite these gains, the sector faces lingering uncertainties due to the Middle East conflict and potential supply chain disruptions, especially for goods reliant on petrochemical materials. Nevertheless, the ability of Japanese department stores to attract a broader range of tourists and sustain growth amid external pressures highlights their adaptability and strategic focus.

IADS Notes: Recent trends in Japanese department store sales reveal a sector in flux, shaped by shifting tourist demographics, currency volatility, and geopolitical uncertainty. After a period of record-breaking duty-free sales in 2024, the market experienced a sharp reversal, with tax-free sales plunging 40% year-on-year by June 2025 and average tourist spending dropping significantly (Japan Times, June 2025; Sora News, September 2025). The appreciation of the yen and higher luxury prices further dampened spending, especially among international visitors, leading to a 36.3% year-on-year decline in duty-free sales by July 2025 (Asahi Shimbun, August 2025). Despite these headwinds, March 2026 brought signs of recovery, as increased spending from tourists outside China—particularly from South Korea, Taiwan, and Southeast Asia—helped offset ongoing declines from Chinese visitors (Japan Times, April 2026). In response, Japanese department stores have accelerated digital transformation, diversified their product assortments, and prioritized domestic engagement to build resilience and reduce dependence on inbound tourism (Inside Retail, April 2026). These developments underscore the sector’s urgent need for innovation, operational agility, and a balanced approach between international and domestic markets to ensure long-term stability.

Japanese department stores’ sales grew for the third month in a row in March