In January, the Japan Department Stores Association reported a 19.1% decrease in tax-free sales, totaling 50.1 billion yen compared to the same month last year. This marks the third consecutive month of decline, largely attributed to a reduction in Chinese tourists stemming from worsening Japan-China relations. Despite this downturn, domestic customer spending rose 2.3%, reaching 491.5 billion yen, indicating a partial resilience in the local market.

The number of inbound visitors to Japan also experienced a downturn, dropping by 21.0% to 468,000 individuals, continuing a downward trend for three months. Chinese tourists alone saw a nearly 40% decrease in their numbers, with sales plummeting about 30%. The Chinese government's advisory against travel to Japan, issued in November, has had a substantial lingering effect on tourism, as noted by a senior official from the Japan Department Stores Association who remarked that the weakness in inbound tourism is likely to persist.

Conversely, sales from domestic customers saw a notable increase of 5.5%, bolstered by the Nikkei stock index maintaining levels above 50,000, which has stoked consumer confidence and spending. This dual dynamic between a struggling international tourism sector and a flourishing domestic market paints a complex picture of Japan's economic landscape in early 2023.