Duty-free sales at Japan¡¯s top department stores fell again in January, highlighting the prolonged pain for the country¡¯s retail industry as tensions between Tokyo and Beijing show no sign of easing.

Takashimaya reported a 19% drop in duty-free sales, citing Beijing¡¯s travel advisory discouraging visits to Japan, though same-store sales rose 7.4%. J Front Retailing said tax-free sales at its Daimaru and Matsuzakaya stores declined about 17%, limiting overall sales growth to 0.7%.

Sales from Chinese customers plunged about 60% due to the absence of Chinese tourists in January, weighing on H2O Retailing¡¯s overall sales growth, which came in at 4.2%. Isetan Mitsukoshi Holdings reported duty-free sales across its domestic stores fell 15% in December, dragging down the total sales growth to 2.1%. Matsuya reported a roughly 16% drop at its flagship Ginza store last month, also citing the lack of Chinese customers.

Chinese visitors have been the backbone of Japan¡¯s post-COVID-19 recovery, contributing about one-fifth of the ?9.6 trillion ($61.9 billion) in tourism revenue in 2025. But worsening relations over Prime Minister Sanae Takaichi¡¯s Taiwan remarks have exposed the country¡¯s reliance on China as a vulnerability, pushing the country to diversify demand.

Arrivals from China plunged 45% to 330,000 people in December, even as overall foreign visitor numbers for 2025 hit a record high ¡ª topping 40 million for the first time. Tourists from other countries helped offset the decline in Chinese travelers, Japan¡¯s tourism minister Yasushi Kaneko said in January.

Japan is targeting 60 million inbound visitors and ?15 trillion in tourism revenue by 2030. The government and tourism industry are also pushing to diversify visitor sources and revenue streams to reduce exposure to Chinese travel demand.

The aim is to lift per capita spending of foreign tourists by 9% to ?250,000 by 2030 and more than double the total number of overnight stays in regional Japan to 130 million people. It also seeks to balance tourism growth with local communities¡¯ wishes while curbing overtourism that¡¯s hurting residents¡¯ quality of life.