Japan is now the cheapest place to buy luxury goods

While the dollar is quickly strengthening and achieving 12-year highs, other currencies like the euro or the yen are experiencing the sugar coated effect of monetary stimulus. This, of course, also has an impact on the luxury goods market, where Japan is now the place to go for consumers willing to buy high-end luxury products. Japanese department stores sold 333 billion yen worth of luxury goods including watches, artworks and jewelry in 2014, up 20 percent from 2012. Over the same period, total retail sales rose 2.6 percent.

After a sharp depreciation of the Yen, many luxury companies have not yet raised prices in the country to reflect the currency depreciation. That´s why Japan has become the cheapest place to buy luxury in Asia and around the world. According to J.P. Morgan,  on average, Japanese prices are 8% cheaper than Hong Kong ones.

Cartier’s Ballon Bleu watch, for instance, is currently even cheaper to buy in Japan than it is in Europe based on several price checks. The LV Speedy monogram is 16% cheaper in Japan than it is in Hong Kong. In addition, Main Land Chinese tourists seem to have grown a taste for new experiences and new destinations, the transfer to new destinations is also a consequence of a cultural change and directly benefits Japan.

Thus, until luxury companies resort to further sizeable price increases, which will likely happen in the coming months, luxury sales should remain high in Japan. Japanese department stores should hence continue to enjoy strong luxury sales, especially among tourists as a key driver. That said, Japan will encounter another imminent hurdle though: in March it will be facing the very tough compares set by ramp up Sales per VAT increase last year.