Japan: Still in the Reckoning?

The Japanese once second only to the US, and once a powerhouse of growth, lost much of its sparkle in the 1990s after the burst of its bubble economy and has never fully recovered its pace of growth since. Though it continued to maintain its position for a long time, in 2010, after the Lost Decade” of the 1990s, as it came to be known, due to a low GDP growth rate of an average of 1.5%, Japan ceded second position to the People’s Republic of China. Now at number 3, and still ahead of Germany, Japan still has some shine left, discovers Arpit Kala, as he presents a quick round up of observations on the jewellery market gleaned during a recent visit to Japan and in discussion with companies in the gems and jewellery business in that country..

Background

Japan is still the third biggest economy of the world. It is more known for its technology and quality. The world knows Japan for brands like Sony, Toyota, Nintendo, etc. Japanese consumers are very technology savvy, and like to keep updating themselves on new developments. This country had gone through heavy recession in the late 1980s and 1990s, went through a brief recovery from 2003 to 2007, plummeted once again during the latest global financial crisis and is still a stagnant economy. Cycles of inflation and deflation are very common and are a constant. Japan’s currency against the US Dollar, fluctuates between 80-90 Yen, twice to thrice in 12 months. Intra-bank financing is at zero per cent, and loans are available at between 3 per cent to 5 per cent per annum.

Jewellery purchasing habits

• Consumers between the Ages of 16 years and 25 years prefer gold jewellery between 10k to 18k. Rings, pendants and earrings with small diamonds sell well. The price ranges anywhere from USD 200 to USD 1000 says Koichiro Murata of Murata Jewellery.

• Those between these of 25 years to 45 years have really restrained themselves from buying jewellery, as this is generation which has gone through the worst recession period of Japan of late ’90s states Suren Kothari, Kothari Trading Co. Also, according to Rajesh Jhaveri of Rosy Blue, they have no real reason to buy jewellery, as, importantly, in Japan there are no occasions which they celebrate by buying jewellery as happens in the US, China, India and many other countries. Nitin Khinduka of VN Trading says they have money but prefer buying new phones, new gadgets, new TV, etc rather than purchasing a solitaire diamond. These consumers have become very cautious and do not believe in buying precious jewellery, so the jewellery they buy is mainly low priced and items which are made with semi precious stones like Topaz, Quartz, Turquoise, Amethyst, etc.

• Consumers between the ages of 45 years and 80 years says Suren Kothari are the ones who make high quality purchases and are considered to have purchasing power. Large white and pink diamonds, big pearls of good quality, natural pearls are highly in demand by this age group. Quality is something Japanese never compromise on, which makes the traders still ticking, keen to have their Sales offices still in this country.

Second Hand, Discounted, and Auction Goods

The Japanese market is seeing a lot of resale of goods. As a result many wholesalers and traders buy these goods and either auction them or sell them as discounted goods in trade shows reveals Suren Kothari. The reason behind this, it is said, is that the consumer in Japan does not have the craze for expensive jewellery and stones. Also having gone through prolonged recessionary periods, they would rather save his money or buy electronic goods rather than own and wear expensive jewellery.

What sells in Japan

• Lot of semi-precious gemstones like Topaz, Tourmaline, family of quartz, etc in the form of loose and beads, says Nitin Khinduka

• Diamonds in white, star, melle, pointers to 40 grainers sell well. Carat up move really slowly. Natural fancy colour diamonds has decent demand, pinks are often demanded. Black diamonds has done well in past and move fine even now.

• One particularity about Japan is that yellow yellow stones like yellow coloured diamonds, or yellow coloured gemstones like Citrines, are not popular.

Branded and Bridal

Rajesh Jhaveri of Rosy Blue explains that the Japanese believe in quality and branded goods. When the DTC introduced Forevermark in that market it received a fabulous response. Consumers chose to purchase an expensive branded diamond rather than a non-branded one, and more importantly as it was introduced for the bridal category. This is one category which still has a lot of potential and can see a good growth.

Pearls

Kobe, Akoya, Kasumigaura pearls which are known for their very high quality white and natural pearl. They are not like South Water Pearls or Tahiti Pearls, which comes in commercial price range, says Yukie Demiya of D & M Pearl Company. Ko-Fuu is the region where various small manufactures has their units and they manufacture 1.3rd of entire Japanese jewellery production. The prices are as high as 1.5 Million yen for 15 mm round white-pinkish Akoya pearl.

Entry barrier

In last 10 years, there are very few companies from outside the country still having offices in Japan, or new ones who have tried entering this market. The reason for the latter, it is said, is that firstly it is necessary to maintain an office in the country in order to provide after-sales service. Secondly, though the Japanese market is still fairly big, there is no growth and the language barrier creates a problem. So companies prefer to go to other areas like China or India instead, which are giving them higher returns and which have greater growth.