What: Japanese department store sales fell 6.2% in July, driven by a sharp decline in tax-free sales to foreign tourists and a drop in average spending amid a stronger yen.

Why it is important: This trend demonstrates how over-reliance on inbound tourism and luxury spending can expose retailers to rapid downturns, prompting a strategic rethink of customer engagement and market positioning.

Japanese department stores saw sales drop 6.2% in July, marking the sixth consecutive monthly decline as the sector grapples with a sharp fall in tax-free sales to foreign tourists. The number of international shoppers plunged 16.7% year-on-year, while average spending per visitor dropped 23.6%, reflecting the dampening effect of a stronger yen on luxury purchases. Tax-free sales slumped 36.3%, with South Korean and Hong Kong visitor numbers particularly affected by geopolitical tensions and negative rumors. The downturn follows a period of record-breaking growth in 2024, highlighting the risks of over-reliance on inbound tourism and currency-driven luxury demand. Industry officials expect the impact of weak foreign consumption to moderate in the coming months, with hopes that robust domestic demand will help stabilize overall sales. The situation underscores the urgent need for Japanese department stores to diversify revenue streams, enhance digital engagement, and strengthen their appeal to local shoppers in an increasingly volatile retail environment.

IADS Notes:

The July 2025 decline in Japanese department store sales and tax-free revenue underscores the sector’s acute vulnerability to shifts in tourism, currency fluctuations, and global sentiment. As reported by Japan Times (June 2025), tax-free sales dropped 40% year-on-year, with average tourist spending falling sharply due to the yen’s appreciation and changing shopping patterns among international visitors. Mint (July 2025) and BoF (July 2025) highlight how this downturn follows a period of record-breaking growth in 2024, revealing the risks of over-reliance on inbound tourism and luxury spending. The situation is further complicated by external factors such as geopolitical tensions, rumors affecting Hong Kong visitors, and a sustained decline in South Korean travelers. These developments have prompted major department stores to accelerate digital initiatives, enhance domestic market appeal, and diversify revenue streams. Collectively, these sources illustrate the sector’s urgent need to balance international and domestic demand, adapt to volatile market conditions, and rethink the traditional department store model for long-term resilience.

Japanese department store sales down 6.2% in July