Japan’s duty-free sales slump as Chinese tourists stay away

TOKYO — Major Japanese department stores reported a sharp decline in duty-free sales for January, as a continued absence of Chinese tourists fueled a prolonged slump in the country’s retail sector.

Industry analysts attribute the downturn to ongoing diplomatic tensions between Tokyo and Beijing. Takashimaya reported a 19% drop in duty-free sales, while J. Front Retailing saw a decline of approximately 17%.

The impact was even more pronounced at H2O Retailing, where sales from Chinese customers plummeted by about 60%. Isetan Mitsukoshi and Matsuya also reported similar downward trends.

Chinese travelers were once considered the backbone of Japan’s post-pandemic economic recovery. In 2025, they accounted for roughly one-fifth of the country's 9.6 trillion yen in total tourism revenue. However, official data shows that Chinese arrivals to Japan fell by 45% in December.

Despite the loss of high-spending Chinese shoppers, Japan’s broader tourism industry remains resilient. Total international arrivals hit a record of more than 40 million people in 2025, driven by a surge in visitors from other global markets.

The Japanese government is now pushing to further diversify its source of visitors. Officials have set an ambitious target of attracting 60 million international tourists annually by 2030.

The sharp contraction in Japan’s duty-free retail sector serves as a stark case study in the systemic risks of market over-concentration, particularly when commercial interests are tethered to a geopolitical rival. Following comments by the Japanese Prime Minister regarding Taiwan, Beijing’s deployment of travel advisories has effectively weaponized outbound tourism, transforming consumer flows into a tool of economic statecraft.

The impact has been profound: several major retail chains reported a 60% collapse in spending from Chinese nationals, revealing the significant leverage Beijing holds over the luxury and high-end goods segments. While Japan’s broader tourism industry achieved record-breaking international arrival figures in 2025, the data reveals a critical imbalance. The surge in visitors from Southeast Asia and Western markets has successfully bolstered headcounts, but their aggregate purchasing power has yet to offset the vacuum left by high-net-worth Chinese travelers.

Tokyo’s revised strategic framework, which mandates aggressive market diversification by 2030, is a tacit admission of this vulnerability. This policy pivot is a necessary defensive measure to insulate the domestic economy from external political shocks. For other regional actors—most notably Vietnam—the Japanese experience serves as a cautionary tale. It underscores the urgent need to decouple tourism growth from single-market reliance and build more resilient, diversified sectors that are shielded from the volatility of bilateral diplomatic friction.

While Japan is seeing a rise in travelers from both Vietnam and the Vietnamese-American community, their priorities lean toward cultural discovery and the local food scene rather than the bulk luxury shopping associated with Chinese tour groups. Because our community tends to value authentic experiences over high-end retail hauls, the current slump in luxury duty-free sales hasn't negatively impacted travel costs or the overall experience for Vietnamese visitors.