Japan Market Report: No Stranger to Tough Times

By Kazuko Ito

RAPAPORT... NHK, Japan’s largest broadcasting company, reported in early January that major department stores across the board had a 10 to 16 percent decline in sales during the holiday season compared to the same period in 2007. “The numbers represent overall sales. If you take jewelry sales alone, I would assume that the declines were between 20 to 30 percent,” said Masahiko Akaike of Orient 4Cs, a gem and jewelry wholesaler.

Nobuhiro Imanishi, president of Imayo Co., Ltd. and also the president of Japan Jewelry Association (JJA), concurred, although he suggested that not all the year-end figures are in yet. “Yes, it is a hard time, everyone is suffering,” he said. “But what is fortunate for Japanese trade members is that we endured long, hard, difficult times” during Japan’s so-called “lost decade” in the 1990s, before this world financial crisis hit world economies. “We had been at the bottom of the market for such a long time, how much worse could we be? This is the attitude I observe among trade members.”

Since the crisis began, Imanishi has observed that the prices of diamonds have come down, but he is not aggressively buying yet. Admitting this might be a good chance to buy, Imanishi said, “Until I get specific orders from our clients, I would rather sell my stock first before buying stones from the market.”

Media Overkill

“I think the media is overdoing their negative reports,” said Imanishi. Akaike agreed that “I wish their reports were more balanced. The bad news just frightens our customers. When this craziness has subsided, I hope they will come back.” Akaike went on to explain that the media had reported Toyota’s and Sony’s big layoffs because they were newsworthy, but the fact remains that “most workers are keeping their jobs.”

In the Kansai area, approximately 300 miles west of Tokyo, the situation is slightly different from that in Tokyo. Fujio Takada, president of Takada Jewelry Co., Ltd., which sells inside department stores, feels that drops in the year-end sales were not as bad as in Tokyo, perhaps 10 percent down from 2007. By Takada’s account, expensive pieces in the $50,000 to $100,000 range sold well, while items priced lower at $22,000 to $28,000 did not. In Nagoya, a midpoint city between Tokyo and Kansai and home to Toyota Motors Company, sales were poor, “which was expected,” said Takada. “But the drop was more than we had imagined.”

Who’s Got Money?

The year-end and the New Year holiday are also the partying season. “This year, high-end expensive restaurants and night clubs in Osaka’s restaurant district were very busy with well-to-do customers,” said Takada, “while their midrange counterparts were not.” Takada figures the high-end customers are small business owners and older retirees with lots of money already stashed away.

“From such information, I must conclude that rich customers are out there,” continued Takada. “As you know, the Japanese are savers. They may be suffering from the 30 percent stock market drop from the peak but, unless they are forced to sell, I believe these consumers can hang on to their paper losses until the market recovers.”

Takada was visiting the Hong Kong Jewelry Show in September, when Lehman Brothers filed for bankruptcy, a move that set the global meltdown in motion. “Sellers were asking prices above Rap at the beginning of the show but, by the end of the show, asking prices had dropped below the list,” he said. “We went on to Dubai to sell the stones, but the prices got even lower.”

Imanishi also pointed to the declining sales of imported wristwatches. “Most jewelers carry half jewelry and half watches in their stores, as watches bring in more revenue than jewelry,” he said. “Not too long ago, customers had to wait to get specific models of the watches they desired. But the watch boom appears to have subsided.”

In mid-December, Louis Vuitton, a world luxury goods merchandiser, announced that it was halting construction of the ten-story building that was going up in Tokyo’s downtown Ginza shopping area, which, when it opened in 2010, was going to be the largest flagship store for the company. “The building had specifications unique to Louis Vuitton,” said Imanishi. “So I imagine changing plans at this stage cost an enormous amount of money. But perhaps this reflects exactly what’s going on in the Japanese market at the moment.”