Japan's duty-free retail sector faces mounting challenges as a sustained decline in Chinese visitors disrupts what was once a thriving economic engine. More than a month after China's Ministry of Culture and Tourism advised against travel to Japan, major department stores report double-digit sales declines during what should be their peak New Year shopping season.
J Front Retailing, operator of Daimaru and Matsuzakaya stores, recorded a 17% year-on-year plunge in duty-free sales this January – dragging overall monthly revenue down 1.9%. Similar patterns emerged across Japan's retail landscape, with industry leaders attributing the downturn to reduced Chinese tourist numbers and cautious spending patterns among remaining visitors.
The 2026 New Year sales period – typically marked by bustling luxury boutiques and packed cosmetics counters – saw unprecedented quiet in urban shopping districts. Analysts warn the trend could signal long-term challenges for Japan's $4.8 billion duty-free market, where Chinese tourists previously accounted for nearly 40% of purchases.
While Japanese authorities have launched promotional campaigns targeting Southeast Asian travelers, industry experts note that spending patterns from these markets have yet to compensate for the Chinese shortfall. With no immediate resolution in sight for the travel advisory, retailers are accelerating digital transformation strategies to court domestic shoppers and diversify revenue streams.
