The weak yen attracts tourist shopping, while local luxury consumption grows in proportion to the country’s average income. Young Japanese post purchases of designer goods on social media as if they were hunting trophies. The mix of tourism, economic growth and local culture has turned the Japanese market into the golden goose for luxury in 2024
by Massimiliano Viti
“Japan has slowed down a bit since the end of July, but it is still a great place to be,” said Prada CEO Andrea Guerra. In the first nine months of 2024, Prada‘s sales in Japan grew by 53% over 2023. Those of LVMH by 36%, while for Hermés, the increase is 23%. The fashion house has strung together nine consecutive quarters of sales growth above 20%. For Kering, the Japanese market rose just 3% but is the only one in positive territory in the third quarter of 2024.
Why does luxury like the Japanese market?
The Japan phenomenon has been fuelled by the massive arrival of international tourists (especially Chinese) who have taken advantage of extremely favourable exchange rates. According to the Financial Times, foreign shopping accounts for one-third of the sales of major brands in Japan. Added to this is the growing spending on luxury goods by the Japanese population, particularly among Generation X consumers, who are usually wealthier and more resilient than the younger age groups. The Asian country was home to three million super-rich in 2023 (ranked fifth in the world, according to the UBS Global Wealth Report). The Swiss bank expects the number of millionaires to increase by 28% by 2028
A place to be
The rise of the Japanese market started a few years ago and is not expected to end soon. Bain stated that in 2023, the value of its market, in relation to luxury, was EUR 29 billion, an increase of 27% at constant exchange rates over 2022. In November 2024, Bain again wrote that ‘Japan continues to lead global luxury growth due to favourable exchange rates and increased tourism spending in the first half of 2024. However, momentum has slowed recently due to price realignment‘. But like Guerra, analysts also believe the outlook for Japanese domestic demand remains promising, thanks to rising real wages and a rising stock market.
A showcase in Tokyo
Even the brands believe it: everyone wants a storefront in Tokyo. With 217 shops, in 2023, the Japanese capital was the city with the most luxury stores in the world, according to data from luxury travel agency Lartisien. At the recent Pitti Uomo in Florence, Toshikazu Nagaoka, general manager of the Japanese brand A Leather, confirmed that sales continue to be strong, driven by the tourist interest in Japan. Many major luxury hotel openings are planned for 2025. While the yen remains substantially weak compared to past years
Cultural reasons
In addition to economic reasons, there are also cultural reasons for the growth of luxury. In Japan, quality is not only appreciated but also revered. This stems from a cultural heritage that values meticulous craftsmanship and perfection, known as ‘monozukuri‘ or the art of making things. Gift-giving, or ‘omiyage‘, is another pillar of Japanese society. (Source ulpa.jp) Luxury items often make perfect gifts to express respect and gratitude or to strengthen business relationships. In addition, luxury goods represent social symbols, silently communicating the role occupied in the social hierarchy. “Japanese consumers are quite difficult to capture as customers, but once you succeed, they are incredibly loyal, probably the most loyal customers in the world,” says Timothy Connor, CEO of Synnovate, a Japan-based retail consultancy. (Barrons.com reports)
A robust second-hand market
When high-spending consumers get tired of their products, many opt to sell them and replace them with something more current. Maintaining appearances is a fundamental part of Japanese culture, along with a particular disdain for anything worn out. Therefore, an obsolete or slightly worn-out product often prompts people to replace it by buying a new, more up-to-date one. This has fostered the creation of a robust second-hand market.
The other side of the coin
The other side of the coin of this mentality is that many Japanese, especially younger women, end up spending a lot (in some cases, too much) just to keep up with the trends. It is no coincidence that Japan is also known for its ‘hypebeasts‘ (almost always male) who wait in line all night in front of a shop and empty their bank accounts to get the latest designer item. They look, metaphorically, like luxury brands waiting for the global market to relaunch. If the world were all like Japan, there would be no problem.
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