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Why are luxury watches, paintings enjoying healthy sales amid pandemic in Japan?

This photo shows luxury watches sold at the Gem Castle Yukizaki store in Fukuoka's Chuo Ward, on Dec. 25, 2020. (Mainichi/Hiroshi Hisano)

FUKUOKA -- Luxury goods such as jewelry watches and paintings are enjoying brisk sales at department stores and other retailers in Japan. Despite concerns of a shrink in consumer spending amid the pandemic-triggered recession, sales of watches priced over 10 million yen (about $96,000) are on the up at some stores. But how are consumer habits changing in the pandemic?

    "We have more customers buying luxury watches than before," said Masakazu Yukizaki, president of jewelry watch retailer Gem Castle Yukizaki, based in the west Japan city of Fukuoka. At the height of the late December 2020 Christmas shopping season when the Mainichi Shimbun visited its Fukuoka store, one of 16 outlets, groups of customers could be seen sizing up the watches on display.

    After the shop reopened in mid-May 2020 following temporary closures due to the coronavirus state of emergency, sales rapidly grew by about 30% at each Gem Castle Yukizaki store. Since then, most stores have maintained higher monthly sales than over the same period a year prior.

    Watches priced 2 to 3 million yen (roughly $19,000-29,000) are popular among wealthy customers. Furthermore, the Gem Castle Yukizaki group as a whole has been selling at least one watch priced over 10 million yen every day; in the years before 2020 it would typically sell a few watches of that value monthly. "It's fun to buy watches and jewelry," Yukizaki said. "There's a lack of fun in the coronavirus pandemic, so we've become a place where wealthy people spend money."

    Jewelry watches and paintings are also leading improvement in business performance at department stores. The Japan Department Store Association reported that in November 2020 nationwide sales had rebounded to 85.7% of the numbers a year earlier. While the effects of the pandemic have brought a varied sales recovery rate to different areas, monthly sales in some areas have returned to 90% of what they were a year earlier.

    An executive at Iwataya Mitsukoshi department store in Fukuoka reported healthy sales of modern art paintings and luxury watches, saying, "Given that foreign tourists accounted for 6 to 7% of sales in 2019, Japanese people's consumption has stayed about the same as the year before."

    This photo shows luxury watches sold at the Gem Castle Yukizaki store in Fukuoka's Chuo Ward, on Dec. 25, 2020. (Mainichi/Hiroshi Hisano)

    But why have people started spending more money during the pandemic? Akane Yamaguchi, an economist at the Daiwa Institute of Research, explained, "The more people earn, the greater their rate of spending on entertainment and leisure like overseas trips. I suspect cash has been spent instead on luxury goods. The coronavirus pandemic isn't an economic crisis where money disappears."

    In contrast to the 2008 global financial crisis triggered by the collapse of Lehman Brothers, stock prices have remained high. According to Bank of Japan statistics, the amount of cash and deposits held by the country's households at the end of September 2020 was 1.034 quadrillion yen (around $10 trillion) -- up 4.9% from a year earlier and a record high. The amount of savings at banks is also growing, and the head of a regional bank said, "It's a result of diminished spending from a lack of opportunity to travel abroad or dine with others. The 100,000 yen subsidy to each resident also boosted savings."

    That people in recent years have come to see paintings and jewelry as assets has also contributed to the economy. According to Yukizaki, high spending has also become common in emerging countries and fuelled continuous price rises for the limited supply of jewelry and gold that exists. "While stock and foreign currency values fluctuate wildly depending on international circumstances, there's little risk in jewelry," Yukizaki said. "There's no reason not to have them, and they're fun to buy."

    Spending on luxury items is not limited to the wealthy. A jewelry dealer said, "The number of corporate employees coming to look at luxury watches has increased. As they can't go out for fun during the pandemic, I think they buy them to treat themselves."

    Regarding "fukubukuro" lucky bags typically sold during the New Year holiday, a department store official said, "Lucky bags priced around 10,000 yen (approx. $100) used to sell most, but now 15,000 yen (about $145) bags are popular with online orders. High priced bags, like ones with bedclothes worth 50,000 yen (around $480), are also selling well."

    People are spending more money even though they're staying home. A corporate employee in their 30s said, "I used to buy 398 yen packs of thin-sliced raw fish sashimi, but now I buy the packs costing about 500 yen."

    But while consumption of goods is up, consumption on services like traveling and dining continue to stagnate due to a resurgence in coronavirus infections. "The divergence in consumption will continue to advance," said Hideo Kumano, chief economist of the Economic Research Department at Dai-ichi Life Research Institute. "In the last 15 years or so in this country, the focus of consumption has shifted from products to services and leisure, and this movement has kept many people employed, some as nonregular workers. In contrast, the risk of bankruptcy and job losses is rising."

    Kumano explained that there is a trend of companies that do well temporarily employ workers from failing companies, saying, "It's ideal that there are more companies employing people as consumption of goods recovers."

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    (Japanese original by Hiroshi Hisano, Kyushu Business News Department)

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