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Weak yen creates luxury arbitrage: Brands feel pressure

Tourists are flocking to Japan to take advantage of discounts on luxury goods due to the weak yen, which recently hit a 38-year low against the dollar. This surge in tourism, driven by lower prices for high-end items like Louis Vuitton handbags and designer sneakers, is impacting global luxury brands, as their products are cheaper in Japan than elsewhere, affecting profit margins. Chinese tourists, in particular, are delaying purchases at home and splurging in Japan, adding pressure on brands like LVMH, which reported a “deflationary” effect on its China business. Despite currency volatility and lower margins, the trend is boosting Japanese luxury sales, with record numbers of foreign visitors and significant spending increases.

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