Japan's Fast Fashion Retailers Weathering Economic Storm
Japan, the world's second largest economy, has been hit hard by the global recession. Now there are a few signs that things might be improving in the retail sector. Fast fashion stores such as Forever 21 and H & M are doing better. But luxury stores are still really struggling.
On Wednesday, The Bank of Japan released its closely monitored business sentiment survey, the tankan, which showed an improvement from a record dip in March but still came in lower than expected and languished in negative territory. The quarterly index gauging large manufacturers' pessimism about the economy rose to minus 48 from minus 58 in March.
Separately, household spending rose for the first time in 15 months, gaining 0.3 percent in May, although some attributed much of the improvement to an isolated event: the government’s 12,000 yen ($125) in cash handouts to each resident.
"Japan's output has bottomed out, thanks to progress made in inventory adjustments, but demand is still weak," said Maiko Noguchi, senior economist with Daiwa Securities SMBC in Tokyo. "[The] improvement in consumer sentiment seems to have been materialized largely by the Japanese government's stimulus measures. Income is likely to continue declining for the time being, and over the medium to long term, Japan’s economy is likely to make a low-level flight."
Consumers aren't likely to do much shopping as job cuts persist, Noguchi said. Japan's unemployment rate just clocked in at 5.2 percent, a five-year high. "We think deterioration in employment will continue to weigh on consumer spending for some time to come," she said.
While fast-fashion players like H&M, Forever 21 and Fast Retailing's Uniqlo are thriving in such a price-sensitive climate, luxury goods companies and department stores continue to suffer. It's a scene dominated by early summer discounts, jam-packed sample sales and empty flagship stores along Omotesando Avenue.
Experts say that the luxury retail market could have been permanently damaged in Japan and that even when the recovery comes consumers won't be spending liek they used to.
