or. The former is set to be a temporary spike, perhaps lasting a few months; the latter is hoped to be more sustainable. In both cases, the surge lasted through May. When the big department store chains turned in their individual reports for last month, it was evident that a change in the composition of tourism was buoying the sector. Koreans and Taiwanese step in to fill a tourism gap Tourism trends have now become a major retail theme around Asia, as conflicts between neighbours loom as large as faraway wars in influencing the ant tracks of overseas travellers. In Japan, the cherry blossom season is now over, and retail has weathered the geopolitical storm, at least so far. International tourism arrivals for the year through the end of April came in at almost 14.4 million, which is only marginally down from last year. That’s not to say that the scars of geopolitical conflict haven’t been left. In this instance, the Middle East conflict was part of the problem, but another major headache was a disagreement with Japan’s Chinese neighbours. Arrivals from China have more than halved, which hurts, because until this year, China was Japan’s biggest source market for tourists, and Chinese travellers like to spend when they’re abroad. Luckily, though, Koreans and Taiwanese have filled much of the breach; arrivals from the former have risen by 22 per cent year-to-date and from the latter by 24 per cent. And they like to spend just as much as the Chinese do. For department stores, it was a merry month in May Japan’s department stores rose above the national retail average, with a same-store sales gain of 4.5 per cent for the first four months of the year. It should be kept in mind, though, that the segment is lapping the first half of 2025, when mid-single-digit sales declines or worse became routine. The hurdle is therefore low, so it is no surprise to see some material increases despite an unfavourable macro landscape. Easy comps or not, you don’t look a gift horse in the mouth, and the good numbers for department stores continued into May. Takashimaya, whose luxury department stores at key international ports of entry and exit are one of its financial bedrocks, enjoyed May results that reflected both resilient domestic spending and the strong presence of customers from Korea, Taiwan and also the US. Sales across its portfolio rose by nearly 11 per cent. Duty-free sales to international tourists soared by 20 per cent. At Isetan Mitsukoshi, the best-performing stores have been three of its five units in Tokyo: Nihombashi, Shinjuku and Ginza, which were all very strong in May. For the year to date, the five Tokyo units have had sales growth of 9.0 per cent. The regional stores, on the other hand, have enjoyed sales growth of slightly under half that, emphasising once again the large schism between the performance of the major city stores and regional department stores in Japan. The company is encouraged, though, reporting that demand for high-end products, particularly jewellery and watches, remains strong. Moreover, it was again overseas customers who sealed the deal: Isetan management says they generally have a greater interest in high-end products than locals and generate a higher average transaction value. J. Front Retailing, which operates the Daimaru and Matsuzakaya department stores as well as a chain of shopping malls, had mixed results in May and for the fiscal year-to-date, again with a bias toward the major city stores in Tokyo, Osaka, Sapporo, Kobe and Nagoya. The long view looks stable Taking a longer view, the performance of department stores in Japan looks fairly stable, with productivity per store improving since the pre-Covid period. This, of course, is a kind of ‘survivor bias’ that occurs when there are many closings in a particular category and only the better-performing stores survive. These capture sales from the defunct stores and are renovated and reinvested to keep them fresh. In 2019, for example, the METI survey covered 213 stores, but closures since then have winnowed that number down to 180. The productivity of department stores, defined as sales per store, has increased nearly 17 per cent over the last six years, but adjusted for inflation, it’s about 4 per cent. That’s a real annual gain of less than 1 per cent, nothing to write home about, and indicates that further attrition in the sector lies ahead. There comes a point at which the massive reinvestment required to keep stores appealing becomes unsustainable in a deteriorating sales environment. In Japan, department stores are cultural icons, but so too are they in the US, where attrition in the sector has been massive and ongoing for decades, with no signs of abating. Home appliances and the ‘2027 problem’ The category that has really experienced a pop in recent months is home appliances. There has been a run on standard air-conditioner models because the government has introduced tougher energy efficiency standards for them beginning in 2027, which means higher prices are on the way. The Tokyo metropolitan government gave air-conditioner sales a further nudge by offering an 80,000 yen (US$500) discount on new models. METI reported a 12.1 per cent year-on-year increase in the category in April, and all indications are that the large chains, such as K’s Denki and Edion, were the primary beneficiaries. The surge in sales has, anecdotally, continued through May and should show up in METI’s next sales report. Department stores and home appliances aside, the first half of the year is looking like business as usual in Japanese retail: only marginal sales growth and weak consumer confidence. Further reading: What is driving Costco’s growth beyond low prices?