Japan is experiencing an influx of tourists who are taking advantage of the weak yen to buy luxury goods.

In recent months, tourists from neighboring countries have flocked to Japan. They take advantage of the depreciation of the yen to buy luxury goods. However, fashion companies are less interested in buying their products in Japan and would rather these consumers buy their products in the domestic market. Reuters reported this.

The yen hit a 38-year low against the dollar in July. Although it has since recovered slightly and has been supported in recent days by the Bank of Japan’s hike in key interest rates, the long-term low exchange rate has triggered an unprecedented tourism boom.

Large numbers of people from Asia and other countries decided to take advantage of the weak yen to buy expensive products from companies such as LVMH, Richemont and Rémy Cointreau.

However, global fashion brands are not welcoming the unprecedented shopping boom in Japan. Their products, from trendy sneakers to scarves, handbags, perfume and even whiskey, are now cheaper in Japanese dollars than buying them elsewhere.

This has a negative impact on the development of corporate profits, while at the same time they are unable to raise product prices to compensate for the weakening of the yen due to fluctuations in the yen exchange rate. This means that they will continue to watch consumers buy their products at significantly cheaper prices and will continue to do so until the yen strengthens significantly.

For example, the popular Luis Vuitton Alma BB bag costs $2,050 (€1,892) in China. However, in Japan, due to the weak yen, it costs the Chinese $1,875. And, in July, when the yen fell to a 38-year low against the dollar, the wallet cost $1,725. As a result, the Chinese are shopping less at home and traveling to Japan in large numbers.

In order for the bags’ prices in Japan to match those in China, the yen would have to appreciate to around 136 yen per dollar. This weekend, the yen hovered above 149 yen per dollar, close to a 4.5-month high.

French company Rémy Cointreau, best known for its Rémy Martin cognac and Cointreau orange liqueur, confirmed that in addition to handbags, shoes and clothes, Chinese are also taking advantage of their trips to Japan to buy expensive spirits.

Similarly, luxury watchmaker Cartier, a Swiss group Richemont, is seeing sales growth in Japan. The company said sales of its products rose nearly 60% in the first quarter of this year, driven by tourists from China, the United States and Southeast Asian countries.

The result was a record high number of tourists visiting Japan last month, at 3.1 million. However, the influx of visitors continues, with Japan on track to beat the full-year record set in 2019, when nearly 32 million foreign tourists arrived.