sation. That should be sending a tremor through the Japanese department store industry, but, at least so far, it has been compensating well. Japan’s Ministry of Economy, Trade and Industry (METI), which issues a monthly snapshot on trade at large retail chains, reported that the country’s department stores held steady with year-on-year sales gains in the low single digits in the first two months of the year. That, however, is tempered by the fact that department stores have now begun to announce a string of negative results that extended all the way through July 2025. So, with the bar now set lower, we should start seeing some material increases again in the first half of this year. There is a caveat: domestic spending has to hold up well enough to offset a potential decline in department store duty-free sales at major international ports of entry, which have been one of the mainstays of growth over the past couple of years. China is a real sticking point in this regard: the management of Takashimaya, one of the country’s most important luxury department store chains, had already indicated in January that inbound tourist spending was suffering due to tensions between China and Japan over Taiwan. Indeed, the Chinese government told its citizens to give Japan a wide berth, and the Chinese appear to be following the instructions. However, department store executives said this was being offset by robust spending from domestic customers. Takashimaya’s February results reflected a poor Chinese New Year, but recent numbers suggest that visitors from other parts of Asia, such as Korea and Taiwan, who are visiting Japan in increasing numbers, could be compensating to some degree: in March, duty-free sales across the company’s 13-store portfolio were up 6.9 per cent on March 2025, with total sales up 7.8 per cent. At the main stores in Tokyo – Nihombashi and Shinjuku – sales were up 18.9 per cent and 8.0 per cent respectively, and other stores in tourist-oriented cities were also doing splendidly, including Kyoto (+9.3 per cent), Osaka (+7.7 per cent) and Yokohama (+7.3 per cent). E-commerce grew by 20.4 per cent. For others, it’s Tokyo or bust. J. Front Retailing, which operates the Daimaru and Matsuzakaya department stores as well as a chain of shopping malls, hasn’t yet reported its sales for March, but like Takashimaya, the results for February were very mixed, with shopper traffic down in most places. Sales netted out to a slight decrease across the portfolio. March should be better. At Isetan Mitsukoshi, good results have been concentrated in the two main stores in Tokyo, which, as for Takashimaya, are located in Nihombashi and Shinjuku. Results have been very mixed elsewhere, with the Tokyo stores dragging up March sales to a 5.5 per cent gain across the portfolio. Specialty stores rebounded in March METI’s report on retail sales for the large chains doesn’t include specialty stores such as Uniqlo and Muji. The news coming from the companies themselves has been largely encouraging. Same-store sales in Japan for Uniqlo’s 739 company-operated store network were up strongly, by 9.2 per cent in March, about doubling the growth in February. The company is particularly happy with the performance of its spring seasonal merchandise, launched synchronously with the arrival of warm weather. At Muji, same-store sales growth has been fairly even throughout the first three months of the year, with an increase of 3.7 per cent in March. There are just under 500 stores in the portfolio. Muji’s start to the year represents a solid recovery from a weak fourth quarter. Consumer sentiment still improving, but may have peaked Consumer sentiment in Japan has been improving in the first quarter of the year, but with prices set to rise due to energy price increases and supply chain disruptions, it is uncertain how long the improvement can persist. Indeed, the official sentiment index was still only sitting around 40/100 in March, so Japanese consumers cannot be expected to go on a spending spree. Department stores must still focus on broadening their customer base beyond the traditional mainstay older demographic, and burrowing deeper into the pockets of their loyal cadre of affluent local consumers who love the department stores’ personalised service. Where to now? In 2025, Japan’s department stores surveyed by METI reported aggregate sales of 6.2 trillion yen. At the industry peak around 1990, that figure was 11.5 trillion, so in yen terms the industry has about halved in size since its heyday. Nominal sales are the lowest they have ever been since METI started reporting the data 45 years ago – and that is not even adjusted for inflation. The number of department stores has declined by roughly 50 per cent since the peak of about 400 back in 1990. Even so, they remain not just an important part of Japan’s retail pantheon, but their outstanding locations, often on busy transport hubs, give them a leg up on many department stores that anchor suburban malls elsewhere in the world. They also remain important to the country’s cultural fabric. Many are located in historic buildings, such as the Mitsukoshi and Takashimaya stores in Nihombashi in downtown Tokyo, which are both housed in heritage buildings. Department stores are not just transactional venues – they are purveyors of high culture. Location and pedigree lend the main stores in the biggest cities a tremendous advantage. However, despite steady closures over time, there still remain secondary and regional stores that are operating on the margin, and Japan’s ageing demographic profile makes further closures inevitable. The only questions are when, and how many. Further reading: Why Japan’s retail recovery faltered