Tokyo (SCCIJ) – At the SCCIJ September 29 Luncheon 2026, 84 members and guests gathered at Shangri-La Tokyo for an insightful discussion with Mr. Davide Sesia, Executive Vice President and Director of Sogo & Seibu Co., Ltd. Drawing on more than three decades of leadership experience in Japan’s luxury and fashion industry, including over 20 years as President of Prada Japan, Mr. Sesia examined the remarkable transformation of Japan’s luxury market. At the center of his analysis was a fundamental distinction: inbound demand has become a powerful accelerator of growth, but the domestic Japanese consumer remains the foundation on which the industry’s long-term future depends.
Mr. Sesia, Japan is experiencing a remarkable luxury boom. What is driving it?
Mr. Sesia: Japan has long been one of the world’s most important luxury markets, but what we are seeing today is a significant acceleration. The combination of a weak yen and strong inbound tourism has made Japan particularly attractive for international luxury shoppers. My analysis looks at fashion, jewelry and watches across department stores, freestanding stores, e-commerce and other channels. What becomes clear from the data is that the recent growth of the market has been strongly supported by inbound demand. The key point, however, is that we should distinguish between the foundation and the accelerator. The domestic Japanese consumer is the foundation of the luxury market. Inbound demand is the accelerator.
Why do you describe inbound luxury demand as largely a monetary phenomenon?
Mr. Sesia: Looking at the relationship between visitor numbers, luxury sales and the exchange rate over time, currency plays an extremely important role. When the yen weakened, Japan became considerably more attractive for international shoppers. Tourists arriving in Japan often find that, when converted into their own currency, luxury products are cheaper than they expected to pay at home. They are therefore in what I call a “surplus position.” The domestic consumer is experiencing the opposite. Japanese consumers earn and spend in yen, while luxury prices have increased significantly. Since 2022, and particularly from 2023 onward, average prices across luxury fashion, jewelry and watches have risen sharply. This creates an important strategic risk. If the yen strengthens again, part of the price advantage enjoyed by inbound customers can disappear very quickly. Brands and department stores therefore cannot assume that today’s inbound demand will continue indefinitely.
How differently are international visitors and Japanese consumers behaving?
Mr. Sesia: Inbound customers tend to have a significantly higher average selling price. They often come to Japan looking for exceptional products, limited items or higher-priced products, precisely because they perceive a price advantage. Domestic consumers face a different reality. Luxury prices in Japan have increased considerably, while purchasing power has not increased at the same pace. This has put particular pressure on the middle class and aspirational consumers. Inbound demand is therefore adding substantial value to the market, but not necessarily the same volume of purchases. That distinction is important when thinking about the sustainability of current growth.
You described the Japanese luxury market as moving from a “diamond” to an “hourglass.” What does that mean?
Mr. Sesia: For many years, Japan had what I describe as a diamond-shaped luxury market. At the top were very important and high-net-worth customers. In the broad middle was a strong Japanese middle class, which played an enormous role in the success of luxury brands. At the bottom were aspirational customers who were attracted to luxury brands and could gradually move upward. That structure has changed.
Today, the market increasingly resembles an hourglass. At the top, wealthy and highly loyal customers remain strong. Below them, there is also a smaller niche interested in what is sometimes called silent or stealth luxury. But the middle has been squeezed considerably by inflation and price increases, while many aspirational consumers can simply no longer follow the market economically. I do not believe that younger consumers have suddenly stopped appreciating beauty or luxury. There is a strong economic component behind the change. If consumers have sufficient disposable income, they will continue to spend on products they value.
Does that mean Japan’s domestic luxury market is in danger?
Mr. Sesia: Not necessarily. The strongest customers remain in the market and continue to purchase, particularly in jewelry, watches and the upper segments of fashion. But the structure of demand has changed, and brands need to understand that change. The strategies that worked during Japan’s long deflationary period cannot simply be applied to today’s market. This is particularly important because inbound demand is volatile. Currency movements, economic conditions and geopolitical developments can all affect it very quickly.
Your title refers to Japan moving “from the Rising Sun to the Rising Resort.” What should luxury companies do now?
Mr. Sesia: My recommendation is straightforward: monetize the Rising Resort, but protect the Rising Sun. Companies should absolutely benefit from the inbound opportunity. It is a high-performing and profitable business. But an international visitor purchases in Japan and then returns home. It is much more difficult to build the same long-term relationship with that customer. Domestic customers are different. They are here. Brands and department stores can build relationships with them over many years. That is why the domestic market must remain at the center of long-term strategy. Inbound can accelerate growth, but it should not replace the foundation.
How can brands and department stores strengthen their relationship with Japanese consumers?
Mr. Sesia: The shopping experience becomes extremely important. Department stores still play a very significant role in Japanese luxury retail. That gives them an opportunity to create stronger experiences around customers rather than simply providing space for transactions. This can include more targeted events, exclusive experiences and merchandising strategies designed around specific customer groups. The objective is to increase loyalty and create reasons for customers to spend more time engaging with brands and with the department store itself. The Japanese department store has traditionally been built around long-term customer relationships. That strength should not disappear, but the model needs to evolve with the changing structure of the market.
You have been closely involved in the transformation of Seibu Ikebukuro. What does this evolution look like in practice?
Mr. Sesia: One example is how categories are organized. At Seibu Ikebukuro, we created an entire floor dedicated to jewelry and watches rather than dispersing those brands throughout the department store. This allows much more focused marketing and customer activities. The same thinking applies to beauty and cosmetics. Traditionally, these categories are often located on the ground floor and treated almost as transit categories. But if you create a dedicated environment around them, the objective changes from maximizing customer turnover to maximizing the quality and duration of the shopping experience. Department stores need to think more like retailers while preserving what has historically made Japanese department stores distinctive: trust, service and long-term relationships with customers.
During the Q&A, the upcoming changes to Japan’s duty-free system were discussed. Do you expect them to significantly reduce inbound luxury spending?
Mr. Sesia: The new system may create some additional friction for international shoppers, and department stores and brands are already preparing their systems for the change. However, as long as inbound customers remain in a meaningful surplus position because of currency and pricing differences, I do not expect that friction alone to fundamentally change their willingness to purchase luxury products in Japan. The bigger issue remains the underlying economic advantage. If that changes, the impact could be much more significant.
What is the main message luxury companies should take from Japan’s current boom?
Mr. Sesia: Do not confuse today’s opportunity with tomorrow’s foundation. Inbound tourism represents an extraordinary opportunity for Japan’s luxury sector, and companies should make the most of it. But inbound demand is inherently volatile. Currency conditions can change. Visitor flows can change. Geopolitical conditions can change. Investment decisions in Japan therefore need to remain long-term oriented. Japan’s domestic customers, the loyalty they have historically shown to brands and department stores, and the relationships companies build with them are what can provide sustainable growth over time. The Rising Resort is an opportunity. The Rising Sun remains the foundation.
About the Speaker
Mr. Davide Sesia is Executive Vice President and Director of Sogo & Seibu Co., Ltd. and has more than three decades of leadership experience in Japan’s luxury and fashion industry. Prior to joining Sogo & Seibu, he spent more than 20 years as President of Prada Japan. His career has given him extensive experience in luxury retail, brand management, consumer behavior and the evolution of Japan’s department store and luxury sectors.
