Japan's luxury market remains resilient despite weak yen, falling wages and rising prices

Fashion

Tokyo, Japan Credits: Jezael Melgoza / Unsplash

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Japan's general fashion and textile market began declining in the 1990s and contracted further during the Covid-19 pandemic. Although a gradual recovery has been observed in recent years, the market has yet to return to pre-pandemic levels.

The domestic luxury market, however, has shown significant growth over the past five years despite the weak yen. According to consulting firm Yano Research Institute, many segments of the luxury market in 2023 exceeded pre-pandemic levels. The apparel market in particular recorded growth of 169 percent. LVMH's 2024 annual results further underscore this growth, with the Japanese market accounting for 10 percent of the group's global sales. This market expansion is attributed to the growing number of newly affluent consumers, foreign tourists and "self-reward spending" among younger generations.

The luxury goods market is now at a turning point. Tourist interest is gradually shifting from "purchasing goods" to "experiences," meaning department store and retail sales growth may not continue in the same manner going forward. Millennials and Gen Z are still at the stage of exploring luxury brand values and preferences through smaller items, rather than being immediate high-value purchasers.

Japan currently represents a crucial market for luxury brands, offering a "dual growth opportunity" to capture both inbound demand and domestic affluent consumers. Its structure is changing, however.

Let us examine who is buying what in Japan's luxury market and how these purchases are being made.

Young consumers' luxury debut through small items

Looking at the age demographics of luxury goods consumers overall, spending activity among younger generations appears robust. According to 2024 statistics from market research firm Market Research Future, the age group with the highest luxury consumption is millennials, who on average earn less than older generations. They are followed by Generation X, who have more time and financial flexibility after child-rearing, and then Gen Z.

Data from management consulting firm Worldwide City Group and Market Research Future indicates that the beauty category, including cosmetics and fragrances, generates the highest sales in Japan's luxury market. This is followed by apparel and leather goods. Cosmetics and fragrances are more affordable compared to products in other categories, making them accessible to a wider audience. The strong sales of personal care products therefore suggest purchases across a broad income range, a trend reflected in consumer age demographics.

Market research firm Imarc notes that women in their twenties and thirties have a strong tendency to purchase luxury items as self-rewards. Luxury items are shifting from symbols of social status to tools for self-investment and self-satisfaction. Products purchased for this purpose are often personal care items such as skincare, cosmetics and fragrances. Nomura Research Institute reports that this age group faces spending constraints due to mortgage payments and childcare costs. In other words, millennials have the purchasing power for lower-priced small items compared to other segments, yet may not be in a position to purchase higher-priced category products.

Gen Z's purchasing power follows that of millennials and Generation X. This generation is brand-conscious and open not only to established luxury brands but also to niche labels, as Vogue Business explains. Gen Z in Japan is developing an interest in luxury at a younger age than millennials, with discovery serving as a significant driving force. A 2024 report from Bain & Company revealed that digital engagement with luxury brands among Japanese Gen Z is declining, whilst interest in second-hand goods is increasing.

In summary, the strong sales of personal care products, which are relatively difficult to substitute with second-hand alternatives, merely indicate an early stage of engagement with luxury brands among younger generations including millennials and Gen Z. Middle-aged consumers appear to be supporting sales of higher-priced items including apparel.

Tourists shifting from shopping to experiences

Online shopping became more widespread following the pandemic, with many millennials and Gen Z consumers obtaining product information through social media. In the Japanese market, however, luxury goods sales remain heavily dependent on in-store retail.

A 2022 McKinsey East Asia consumer survey conducted after the pandemic reported that 36 percent of Japanese luxury consumers discover and purchase products in-store. When including cases where consumers learn about products online and purchase in-store, or confirm products in-store before purchasing online, approximately 79 percent of consumers utilise physical stores at some point in their purchasing process.

This sales pattern is attributed not only to the inherent Japanese consumer preference for hospitality and customer service, but also to the increase in tourists.

According to the Japan Department Stores Association's 2024 national sales overview, duty-free sales representing foreign tourist spending increased by 85.9 percent year-over-year (YoY) to 648.7 billion yen. Foreign tourist spending also contributes significantly to overall sales figures. Isetan Mitsukoshi, which operates one of Japan's largest department store networks, saw sales rise from 816 billion yen during the pandemic year of 2020 to 1.3 trillion yen in fiscal year 2024. The importance of physical stores is also reflected in LVMH's annual financial report. The number of stores in Japan increased by just one between 2022 and 2023, but grew by 13 stores between 2023 and 2024, indicating the brand's increased focus on in-store retail.

Hamagin Research Institute reports that the growth rate of department store sales from foreign tourists, which had maintained YoY increases in 2024, has turned negative from 2025 onwards. This reflects a shift in tourist demand. According to data from travel industry news outlet Travelvoice, shopping expenditure as a proportion of foreign tourist spending from July to September 2025 decreased by approximately 3 percent from 28.6 percent during the same period in 2024. Food and beverage spending increased by 1 percent and entertainment expenses rose by 0.4 percent. Tourist interest is shifting from shopping to experiences, and department store sales are at a turning point.

Changes in sales approach and quality to stabilise luxury market

To stabilise Japan's luxury market going forward, sales methods emphasising experiential value and brand strategies that account for secondary distribution will be essential. Inbound demand remains important, yet tourist interest is shifting from "purchasing goods" to "experiences." Growth dependent on traditional high-volume purchasing models is beginning to show its limits. Younger generations are not immediate purchasers but remain important as a future customer base. In the apparel sector, intrinsic values such as quality and sustainability will be scrutinised more than ever.

This article was translated to English using an AI tool.

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