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.Kouhei Yanagisawa, director of the 10-unit Hankyu Department Stores, said big brands are holding their own in department stores, but he doesn't expect any dramatic improvement in business until at least the fall. "Until September of this year, economic conditions won't be so good," he said. "We hope they will improve."

But while the Japanese market remains in flux, Hong Kong and other areas in the Far East are holding their own.

"Business is actually quite strong, although there was definitely a slowdown in the third and fourth quarters of last year," said Bonnie Brooks, group general manager for merchandise at Dickson Concepts, adding that luxury is still a strong category, with accessories and jewelry showing more strength than apparel.

Joyce Ma, founder of Hong Kong-based Joyce Boutique Holdings, was also upbeat. "In our shops, our spring season has started off very well. Things seem to be picking up," she said. Asked if accessories are performing, she replied: "For the moment, they're just buying clothes."

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