Tokyo’s diplomatic feud with China threatens to undermine the tourist boom that boosted Japanese retailers such as Uniqlo, Muji and Don Quijote and helped reshape their business models.
Chinese visitors to Japan, the second-biggest cohort, plunged 61 per cent in January compared with the same month a year ago. This followed a slide of 45 per cent in December, bringing the first overall fall in tourists travelling to the country in four years, according to official data.
The decline in Chinese visitors meant the amount they spent in Japan in the last three months of 2025 fell by 17.6 per cent to $2.2bn.
The spat was triggered by comments made by Prime Minister Sanae Takaichi in November about how Japan’s military would respond to a hypothetical Chinese invasion of Taiwan.
Beijing’s travel advisory against visiting Japan has prompted airlines to offer free flight cancellations and cut back on routes, while some travel agents no longer offer tours to the country.
The Japan Research Institute estimated that long-lasting travel curbs could cost Japan ¥1.2tn ($7.7bn) this year.
Japan’s tourism industry has undergone a big transformation since 2015, when Chinese tourists’ spending on luxury goods at department stores was dubbed bakugai, or “explosive shopping”, by local media. China’s share of the number of people travelling to Japan has fallen in recent years, from 30 per cent in 2019 to 23 per cent of the 42.7mn visitors to the country last year.
The shift has meant that retail spending by tourists in Japan is “not as skewed towards luxury goods as before”, said NLI Research’s Naoko Kuga, with the unit price of items purchased also falling.
The pivot has been a tailwind for the likes of Fast Retailing’s Uniqlo, general merchandise emporium Don Quijote and Asics’ luxury brand Onitsuka Tiger, for whom tourists account for 10, 14 and 60 per cent of domestic sales respectively.
Motoki Hata, a senior manager at Don Quijote-owner Pan Pacific International Holdings, said that purchases by Chinese tourists at the chain’s stores had declined from 40 per cent in 2019 to 15 per cent of the tax-free sales total. That sum has consistently hit ¥20bn in each of the past four months.
“It’s true fewer Chinese customers are coming, but that doesn’t mean overall sales have fallen as we’re seeing growth in other east Asian countries, south-east Asia and western visitors,” he said.
Hata said his company now aimed to strengthen events and experiences at its stores to draw in more overseas customers, cement Don Quijote as a tourist destination and drive more user-generated content on social media.
Historic yen weakness, tax-free shopping and unique product offerings have been the main forces behind the “everything I bought in Japan” or “Japan haul” social media trend of influencers showcasing suitcases packed full of goods snapped up on their travels.
Matt and Julia, a firefighter and healthcare administrator from Boston, were two of those who have spent big in Japan. On the last day of their 12-day trip in February, the couple and their two daughters were queueing outside Onitsuka Tiger in Ginza an hour before opening time hoping to buy a pair of embroidered trainers each, adding to the thousands of dollars they have already spent on cosmetics, watches and golf equipment.
“The sneakers are half the cost here than they would be in the United States,” said Julia. “We’re buying an extra suitcase. We packed empty duffel bags and an empty carry-on, but we’re still short on one suitcase.”
However, department stores have been stung by the falling purchasing power of Chinese tourists. The four major chains all suffered a double-digit drop in duty-free sales in December and January.
Isetan Mitsukoshi Holdings is one of the four. Tsuyoshi Oyama, its corporate communications manager, said the business had introduced a rewards app, which 700,000 tourists have signed up to, in a bid to stem the decline. The retail group also has 45 personal shopping assistants for visiting wealthy customers.
“The volatility coming from exchange rates and political factors really is a challenge. These are measures to reduce the volatility,” Oyama said.
Sho Kawano, a Goldman Sachs analyst, said that much of the hype around surging tourist spending was already baked into Japanese retail stocks.
He said investors were now focused on the Japanese retailers which are able to execute a global expansion strategy that allows them to target markets with stronger currencies and produce bigger profits.
“Tourist shopping patterns give a good indication on where to expand globally,” Kawano said, citing Onitsuka Tiger’s popularity with Americans visiting Japan as a factor behind its decision to open US stores from 2027. “It’s shifting to become more about brands able to take off outside Japan.”
Seiko is one Japanese retail brand appearing to have success in doing so. The watchmaker’s shares have doubled in the past six months following two successive profit upgrades, driven by strong sales for its upmarket Grand Seiko range at home and abroad.
