TOKYO — There are indications the health of recession-plagued Japan is improving slightly — but market watchers warn a full-fledged recovery for the world’s second-largest economy is far from imminent.
On Wednesday, The Bank of Japan released its closely monitored business sentiment survey, the tankan, which showed an improvement from a record dip in March but still came in lower than expected and languished in negative territory. The quarterly index gauging large manufacturers’ pessimism about the economy rose to minus 48 from minus 58 in March.
Separately, household spending rose for the first time in 15 months, gaining 0.3 percent in May, although some attributed much of the improvement to an isolated event: the government’s 12,000 yen ($125) in cash handouts to each resident.
“Japan’s output has bottomed out, thanks to progress made in inventory adjustments, but demand is still weak,” said Maiko Noguchi, senior economist with Daiwa Securities SMBC in Tokyo. “[The] improvement in consumer sentiment seems to have been materialized largely by the Japanese government’s stimulus measures. Income is likely to continue declining for the time being, and over the medium to long term, Japan’s economy is likely to make a low-level flight.”
Consumers aren’t likely to do much shopping as job cuts persist, Noguchi said. Japan’s unemployment rate just clocked in at 5.2 percent, a five-year high. “We think deterioration in employment will continue to weigh on consumer spending for some time to come,” she said.
While fast-fashion players like H&M, Forever 21 and Fast Retailing’s Uniqlo are thriving in such a price-sensitive climate, luxury goods companies and department stores continue to suffer. It’s a scene dominated by early summer discounts, jam-packed sample sales and empty flagship stores along Omotesando Avenue.
That said, some luxury executives have noted modest signs of business picking up.
“The past few weeks have seen a slight improvement, and we are hoping that a positive trend will develop,” said John Hooks, deputy managing director at Giorgio Armani, which last month opened a large flagship in the Roppongi Hills development. “Sales are tough. Our comp sales are down on last year, but less dramatically compared to some other markets such as the U.S.A. In department stores, we are faring better than most, particularly with Giorgio Armani.”
Consumers haven’t stopped shopping altogether — but they are clearly trading down these days and reprioritizing. The most hotly anticipated arrival in Ginza isn’t a European luxury brand but rather Abercrombie & Fitch. Meanwhile, Gap is preparing to make a big statement in the neighborhood; it will occupy the new 10-story building originally intended for a Louis Vuitton store.
Observers like Nicole Fall, a trend director at Tokyo-based consumer consultancy Five by Fifty, are questioning just how much consumers’ bargain-basement mentality will erode the luxury market in the longer term. Bain & Co. estimated luxury goods sales in Japan declined 10 percent in the first half of this year.
“My feeling is the luxury business may be damaged for quite some time if not permanently due to this recession,” Fall said. “Consumers, especially Japanese consumers, have long memories, and it will take them quite a while to convince them shopping is high on priorities when the media is consumed with unemployment news and bonus cutting this summer.”
Nobuyuki Ota, president of Issey Miyake and chief of Japan Fashion Week’s organizing committee, stressed that luxury labels need to start thinking about new business opportunities in the current climate. He cited Comme des Garçons’ new lower-priced Black collection as a good example. “The customers are paying more attention to the price, and they would like to buy [reasonably priced] merchandise with the same quality and newness,” he said. “The most important thing for us will be to create new business with another viewpoint.”
As the rosier prospects of China, India and other emerging markets tempt fashion companies, executives are reevaluating the overall importance of Japan to the future of the industry. With a market worth something close to $20 billion, Japan is a large chunk of the world market, but its growth prospects are limited. Japan is the Organisation for Economic Co-operation & Development’s “oldest country” with just 2.6 people of working age for every person aged over 65, according to a recent report from the organization. That compares with an average of four for other OECD countries.
Claus-Dietrich Lahrs, chief executive officer of Hugo Boss, noted small signs of recovery in the Japanese market, and he’s optimistic conditions will improve next year — but remains cautious in the longer term. “It’s a very important market, but it continues to be difficult due to its demographics,” he said.
Patrick Thomas, chief executive of Hermès, voiced a similar view. “Japan is tough for everyone. We are doing OK, but we are not seeing the same growth rate as in the year before,” Thomas said. “Japan is the most difficult market, and the problem of Japanese demographics is not going away tomorrow.”
In contrast, Davide Sesia, chief executive of Prada Japan, was much more bullish on the Italian house’s prospects here. “Prada is outperforming the market. We think we will be able to close 2009 with the same level in revenue as in 2008, in line with our budget forecasts. Furthermore, in June we [registered] very good performances,” said Sesia, who added consumers reacted positively to the fall-winter Prada and Miu Miu collections. Sesia went on to say Prada is not altering its investment plans for Japan and actually took advantage of market conditions to secure rental contracts and better space in department stores.
“All of the renewals and new openings we’ve carried out until now have showed that — even when the market is at a standstill — customers are receptive to new initiatives,” he concluded.
Taking the final spot on the mens’ portion of New York Fashion Week calendar next month will be none other than @tomford. Though he’s shown his men’s wear in New York in the past, this will mark the first time the designer has shown his men’s collection alone during New York Fashion Week: Men’s. His runway show will debut on February 6 at the Park Avenue Armory. #wwdfashion
London-based couture house @ralphandrusso has certainly been in the spotlight, having its dresses worn by @beyonce, Angelina Jolie, Meghan Markle in her engagement photos and more. For couture, Tamara Ralph focused on ornamentation — think: feathers with chain mail, jet embroidery and clusters of pearls and crystals. See the rest of the collection on WWD.com #wwdfashion #couture (📷: @giovanni_giannoni_photo)
Minnie Mouse celebrated her 90th birthday by getting her own star on the Hollywood Walk of Fame. For her celebratory luncheon, @coach’s creative director @stuartvevers dressed her in a custom made prairie dress, complete with Vever’s take on the polka dot – black sequined versions – under a cropped motorcycle jacket. The designer also put his own mark on Minnie’s classic red shoes, infusing the color with sparkles and adding some Coach crystals. “We chose colors that were very Minnie and also represented quintessential Coach elements,” said Vevers. #wwdfashion #nationalpolkadotday (📷: George Chinsee)
@nickjonas is unveiling his first-ever apparel collection through a partnership with John Varvatos. The limited-edition capsule, which makes its debut in spring, also marks the first time the designer has collaborated with anyone on a line. “The process in working with Nick is amazing. It’s inspiring to be around someone who is not only connected with the trade that they do, but also with what’s happening in the environment around him, and how that connects to what we do with style,” said Varvatos. (RG: @johnvarvatos) #wwdfashion
@margotrobbie steps out onto the red carpet wearing @miumiu. The actress is nominated for “Outstanding Performance by a Female Actor in a Leading Role” in “I, Tonya” at the #SagAwards. (📷: Stewart Cook) #wwdfashion
For @massimogiorgetti of @msgm, the Nineties are his favorite decade. “They had a huge impact on my personal growth. What I like of the Nineties is that they are not so precise in terms of style as other decades…there was actually a bit of everything,” he said. As seen on MSGM’s Spring 2018 show: tie-dye and a bit of grunge, two styles that are synonymous with the decade #wwdfashion #wwddecades (📷: @kukukuba)