2024-08-06 00:56:42
Throngs of tourists travel to Japan to buy luxury clothes and handbags, the price of which has fallen sharply due to the weakening of the yen. But luxury goods companies such as LVMH, the parent company of Louis Vuitton, would prefer tourists to stay in their countries and shop there, Reuters wrote.
The Japanese currency hit a 38-year low against the dollar last month before strengthening slightly again, sparking unprecedented growth in tourism and attracting buyers from Asia and elsewhere to Japan. Global luxury brands are not welcoming the development, as their goods, from designer sneakers to whiskey, are now cheaper in dollars in Japan than elsewhere, cutting into their profits.
Some tourists, especially Chinese, are putting off buying brand-name goods at home and spending in Japan. The yen’s volatility means companies can’t easily raise prices to accurately reflect the currency, leaving Japan with lower margins, at least as long as the yen is weak.
Zhang Lei, a 29-year-old DJ from China’s southern Hunan province, was in Japan for the first time, but said he wanted to visit the country again.
“It’s cheaper,” said Zhang, carrying two shopping bags from the Louis Vuitton boutique and one from sportswear brand Onitsuka Tiger in Tokyo’s upscale Ginza district. Nearby, about 15 people stood in line for the Louis Vuitton boutique, fanning themselves in the sweltering heat.
The wave of tourists surprised the French luxury giant LVMH, which also owns Dior and Fendi.
“We’ve really seen a big shift of business from Asia to Japan,” said LVMH chief financial officer Jean-Jacques Guiony. This is having a deflationary impact on LVMH’s business in China, he said, as customers refrain from shopping at home, putting considerable pressure on margins.
He also commented on the difficulties caused by the volatility of currencies, whose movements can be reversed very quickly. This was evident this week as the yen surged after the Bank of Japan raised interest rates on Wednesday.
The popular Louis Vuitton Alma BB handbag is sold in China for 14,800 yuan, which is equivalent to 2,050 dollars (about 48,090 crowns). In Japan, the bag sells for ¥279,400, or $1,875. Last month, when it was only the weakest, it would have been available for 1725 dollars (just under 41,000 crowns).
The Japanese currency would have to appreciate to around 136 yen to the dollar for the price of a handbag in Japan to match its price in China. The currency was at 149.30 against the dollar on Thursday, almost the strongest value in four and a half months.
Chinese tourists in Japan are also boosting sales of luxury spirits, drinks maker Rémy Cointreau said. Japan posted strong sales growth boosted by tourism and a weak yen, said Luca Marotta, the French group’s chief financial officer. Sales were at a lower margin, he added.
Swiss luxury group Richemont, which owns the Cartier brand, saw sales in Japan jump nearly 60 percent in the first quarter, boosted by tourists from China, Southeast Asia and the Americas.
“Shopping, shopping and shopping,” Indonesian tourist Fumiko Annisa said of her plans. “Luxury brands are cheap here,” she said. “We’re going to shop at Dior, but first we’re going to Chanel,” Annisa said.
Japan received a record 3.1 million foreign visitors in June, according to official figures, and the country is on track to surpass the record of nearly 32 million foreign visitors set in 2019, before the covid-19 pandemic halted travel worldwide.
According to the Japanese government, which considers tourism to be a rare driving force for the growth of an economy that has long been hampered by an aging population, tourist spending this year will reach eight trillion yen (1.26 trillion crowns).