(C) Mind Trip

TOKYO – Japan’s retail sector, particularly its high-end department stores, is facing a severe crisis as a de facto travel ban from Beijing on trips to Japan begins to hollow out what was once the industry’s most lucrative customer base.

According to projections released on January 17, 2026, the combined operating profits of Japan’s six major department stores are expected to plummet by 24% for the period between December 2025 and February 2026 compared to the previous year. This downturn underscores the fragility of a business model heavily reliant on "bakugai," or explosive buying, by Chinese tourists.

Empty Aisles During Peak Season
Traditionally, the period from December to February—encompassing the year-end holidays and the Lunar New Year—serves as the gold mine for Japanese retailers. However, the streets of Tokyo’s historic Asakusa district and the luxury corridors of Ginza tell a different story this year.

At the Senso-ji Temple, a landmark typically teeming with Chinese tour groups, foot traffic has dwindled significantly since mid-November 2025, when the Chinese government began discouraging travel to Japan. The ripple effect has been immediate and devastating for retail balance sheets.

Profit Projections Slash as ‘Big Spenders’ Disappear
Recent data from major retailers paints a grim picture:

J. Front Retailing: The operator of Daimaru and Matsuzakaya saw sales at its Osaka Shinsaibashi, Umeda, and Kyoto branches fall by 6–8% in December. The company projects a staggering 53% drop in operating profit for the current quarter.
Matsuya: Its flagship Ginza store reported an 11% revenue decline, while its Asakusa location saw a 20% drop. Matsuya’s quarterly profit forecast has been slashed by 81%.
Takashimaya: Reported that sales specifically from Chinese customers have cratered by 35%.
“The impact of the travel restrictions is likely to be prolonged,” warned Keiichi Ono, President of J. Front Retailing. With flight frequencies between China and Japan continuing to decline, the outlook for 2026 remains bleak.

The Heavy Toll on High-End Retail
In 2024, Chinese tourists accounted for 1.7 trillion yen in spending—roughly 21% of all inbound tourism consumption in Japan. Unlike general tourists, Chinese visitors are the primary drivers of the "luxury segment," focusing their purchasing power on high-end cosmetics, designer watches, and fine jewelry.

While supermarkets and casual apparel chains are feeling the pinch, department stores are taking the direct hit because their margins are so closely tied to these premium goods. UBS Securities predicts that spending by Chinese tourists could be cut in half this year, while Daiwa Securities anticipates at least a 30% reduction.

A Race for Diversification
Faced with the reality that Chinese tourists may not return in force anytime soon, Japanese retailers are frantically shifting their strategies to attract visitors from Southeast Asia, the West, and the domestic market.

Takashimaya is leveraging its presence in Singapore, Thailand, and Vietnam by issuing VIP cards to loyal customers in those regions, providing them with priority tax-free processing and concierge services when they visit Japan.
J. Front Retailing is pivoting toward "content-driven" retail, expanding its inventory of Japanese entertainment and pop-culture merchandise, which enjoys global popularity beyond the Chinese market.
Matsuya has diversified its digital marketing, moving beyond WeChat and Xiaohongshu to emphasize English-language social media campaigns, focusing on cosmetic promotions for a broader international audience.

The Path Forward: From ‘Buying’ to ‘Experiencing’
Analysts suggest that the current crisis might be a necessary, albeit painful, wake-up call for the industry to evolve. Emiri Shigeoka, an analyst at Daiwa Securities, noted that the key to future survival lies in "experience-based consumption."

"The era of relying solely on mass-purchasing of luxury goods is shifting," Shigeoka said. "To capture the next wave of inbound wealth from the U.S. and Europe, Japanese department stores must offer unique, culturally immersive experiences that cannot be bought online."

As the industry stares down a projected multi-billion yen shortfall, the race is on to see if Japan’s iconic retail giants can reinvent themselves before the winter of 2026 turns into a permanent frost.