TOKYO — The yen might be in decline and other economic variables frighteningly unstable, but at least the Japanese have gotten back their appetite for fashion.

With a national recession now in its second decade, unemployment hitting a record of 5.5 percent in November, after setting a mark of 5.4 percent in October, and a record 1,843 bankruptcies in October, pessimism about the future is deep and widespread. However, the final months of 2001 provided rays of light for the fashion industry, particularly the high end, as shop openings increased and many department stores registered gains for the year. Furthermore, with overseas travel down, many expect an increases in domestic consumption, and fashion is expected to be among the beneficiaries.

There are long lines daily at the new Hermes flagship in Ginza and busy sales floors at Gucci and Louis Vuitton. More than 100 fashion stores bowed in 2001, including Paul Smith Women, Katharine Hamnett, Christian Lacroix and Paul and Joe in Daikanyama; Hugo Boss and Emporio Armani in Marunouchi, and Anna Molinari, Neil Barrett and another Emporio Armani in Aoyama. Uniqlo’s rapid expansion in Japan is seen as another sign of the market’s willingness to embrace fashion.

Broadlines retailers also showed signs of emerging from the doldrums last year. Isetan returned to profitability in the first half ended Sept. 30, as sales increased 7.2 percent. Tokyu Department Stores cut its losses dramatically in the first half ended July 31, as sales advanced 3.7 percent.

“Japanese domestic consumption wasn’t hurt by the terrorist events” of Sept. 11, said Kana Sasaki, analyst at Tsubasa Securities Economic Research Institute. “It seems that the decline of department-store sales has bottomed out and that the local apparel market has been picking up little by little.”

The opening of Esquisse Omote-Sando was symbolized by what at the moment appears to be a partial rebirth. The building was originally used by MYCAL, a major retailer in Japan that went bankrupt last year. The space was reborn with luxury brands such as Gucci, Chanel, Yves Saint Laurent Rive Gauche and Alexander McQueen. Christian Dior and Vuitton are planning megastores in the neighborhood.

The government’s numbers would hardly suggest fertile ground for expansion of upscale spending. Unemployment is at unprecedented levels, production has remained depressed, as manufacturers wait for retailers to work off high inventories, and overall retail sales dropped 2.7 percent in November, the eighth consecutive month of declines.

Yet, economic weakness has translated into opportunity. “The year 2001 was one of the best times for fashion retailers to open shops,” said Sasaki.

That’s because occupancy costs have followed the rest of the economy. The price of rental property has dropped between 10 and 20 percent from 1989 peaks in some commercial zones, according to a spokesman for the Japan Real Estate Institute. “Prices have been coming down for 10 years. Overseas luxury brands are investing here frequently now,” he said, noting that some of the more popular retail districts, such as Aoyama and Ginza, have started to see prices rebound.

Retailers are starting to believe the worst is behind them. Highlights from a study by the Japan Department Stores Association show:

83.3 percent of department store executives expect profits for the remainder of the fiscal year ending in March to be either flat or higher than a year ago.

A rise in sales is expected by 38.9 percent of executives, while 27.8 percent expect sales to be the same as they were in the prior-year period.

Of 108 officials polled, 56.5 percent expect profits to rise next year, versus 9.3 percent who expect a drop, and 39 percent expect higher sales, while 15.7 percent foresee a downward sales trend.

In further signs of optimism, 27.8 percent said they think the economy is picking up, 45.4 percent think it will recover within the first half of the year and 60.2 percent of them predict a recovery before next winter. More than half — 56.7 percent — credit store renovation and better merchandise with leading to a retail recovery.

“Renovation of the sales floor at department stores and strong concepts from within the industry led the fashion market,” said Masafumi Shoda, retail sector analyst at The Nomura Securities Financial Research Center. “Before, basic casuals at low prices were the norm at department stores, but now, many have opened in-store shops for luxury brands.”

Hankyu Department Store in Umeda, Osaka, completed renovation of its cosmetics floor in September and “sales for the month increased 15 percent” said Hideo Sato, cosmetics merchandiser for the retailer. Hankyu opened Nars and Benefits counters last fall.

Shoda said the Japanese psyche wasn’t wounded by the recent terrorism in the U.S., but “a slowdown in international business might reduce salaries and eventually strain consumption.”

JTB, the nation’s largest travel agency, said that between Sept. 11 and the third week of November, travel business fell by 40 percent, although that reduction is now about 35 percent.

“Travel to the Asia/Oceania region is about 80 to 90 percent of what it was a year ago and, to Europe, it’s 65 percent,” said a JTB spokesman, “but, to North America, it is still 30 percent of what it was a year ago.”

Onward Kashiyama president Takeshi Hirouchi calculated that about $3.1 billion that was originally expected to be spent overseas by Japanese travelers will be spent in the domestic market instead. Of course, “not all of it will be used for apparel products,” said Kazuo Tanaka, president of another Japanese manufacturer, Sanyo Shokai.

(Dollar figures have been converted from the yen at current exchange rates.)

While retail sales may have dropped in November, the Japan Department Stores Association said that same-store sales at Tokyo department stores rose 1.5 percent, to $1.5 billion during the month.

In Japan, luxury brands have scarcely missed a beat. Sales of Louis Vuitton Japan in September grew at a double-digit rate, the firm said. Although most of the brands declined to comment on their sales in September, “their product development for the beginning of fall and the timing of the release of their merchandise worked excellently,” said Masayoshi Soutome, senior analyst at Mitsubishi Research Institute. “In the recent bipolarization of consumption, high-end brands have sold well, while moderate merchandise has had a difficult time. Established luxury brands are strong because they’ve marketed high-quality products properly.”

Soutome warned, however, that “further economic slowdowns, declines in salaries and further restructuring of firms, causing higher unemployment, are expected.”

Tsubasa’s Sasaki believes that both Sept. 11 and the weakness of the yen have created a “shop-at-home” focus: “Money that Japanese tourists spent in Hawaii and other places in North America last winter will be used in the domestic market. The low yen also will lead Japanese to stay in the country.”

While encouraged, analysts are being careful not to be too optimistic.

“In the coming year, we have to watch our reactions to the positive news of 2001,” said Nomura’s Shoda. “The renovation effect will help the department stores for a year, but it is another matter if they can expect the same effect in 2002 or 2003. The closings of supermarkets will continue. The employment picture remains severe.”

Sanyo Shokai’s Tanaka believes that 2002 will be tougher than 2001.

“Social and economic structures became more complicated,” he said. “Sometimes, I don’t see any pessimistic sign on the street, but it doesn’t mean that we can be optimistic. It’s just one aspect of the whole economy.”