By and  on March 11, 2002

MILAN -- The deep recession in Japan may be forcing bankruptcies and rising unemployment, but there's at least one relative pocket of strength: The young luxury set -- consumers in their 20s and 30s -- are keeping fashion retailers energized.

While the sharp decline in Japanese tourism, which dropped 24 percent last year compared with 2000, has dealt a major setback to such markets as Hawaii, New York and California, it's provided a silver lining of sorts, as consumers are spending more domestically.

But while Japanese tourists are still scarce, buyers for the country's stores are visible again in New York, Paris, Milan and Los Angeles. According to these buyers, the after-effects of Sept. 11 had a lot to do with stabilizing the local market in luxury goods. The heavyweights, such as Louis Vuitton, Gucci, Chanel, Hermes and Christian Dior, are faring best, and Japanese retailers said they would continue to focus their attentions on such first-string players.

But budgets remain tight and the consumer mood unpredictable. The major problem remains the depressed Japanese economy. Overall retail sales fell 2.1 percent last year, with sales at major stores falling 3 percent, their 10th straight year of decline. Japanese consumer confidence fell to 39.2 percent in November -- the latest figure available -- from 45.2 percent in January 2001.

There are pockets of cheer, however. Despite the sharp decline in retail sales, sales of shoes and handbags rose 4.5 percent last year, according to the Ministry of International Trade and Industry, further indication that it's luxury accessories that are most-sought after by the Japanese consumer.

"Not so many Japanese have been traveling to New York or Europe," noted Kawabe Yukino, merchandise planning director for the 14-unit Mitsukoshi department store chain. "So instead of buying this merchandise as tourists, they're spending their money in Japan. Handbags are strong, and high-end jewelry, including watches, are the strongest."

Yuki Hirota, a buyer for The Seibu Department Stores Ltd., pointed out that the Japanese are spending money both in the high end of the market and at fast-fashion stores such as Uniqlo, the Japanese apparel and homewear chain.

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