In Japan, it often seems, shoppers can never have enough handbags. Even during the 1990s recession or in the early 2000s when restructuring led to mass lay-offs, crowds continued to flock to designer stores. This time round, however, Japan has dropped the Hermès arm candy with a thud. Sales in Japan’s $15bn-$30bn luxury market fell 10 per cent in 2008, according to Yano Research Institute’s measure of imported brands, and are forecast to drop another 7 per cent this year.

What is really spooking the industry though – in a country that has accounted for over half of Louis Vuitton’s sales – are fears that buyers will stay away when the economy recovers. McKinsey & Co, the consultancy, lists three reasons: the structural decline of department stores, which today account for 60 per cent of sales; the popping of a “luxury bubble”; and more individualistic consumers. In part, the industry sowed the seeds of its own destruction by building more and bigger stores at the start of the decade and ratcheting up prices as they did so. That process is now reversing: Louis Vuitton recently scotched plans to open a flagship store in Tokyo’s glitzy Ginza district.

Other trends are more universal and pre-date the luxury boom. Today’s funkily dressed Harajuku girls follow their takenoko-zoku mothers and grandmothers who spurned brands in the 1970s in favour of more exotic and improvised garb. More shopping is also done online or at outlet malls.

Anyway, sales of luxury goods cannot outpace economic growth forever. Afrifocus Securities notes that the global luxury market grew more than 12 per cent a year between 2004 and 2007, while world nominal output expanded 8 per cent. That leaves China as the remaining source of growth in the industry.

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