Duty-free sales at Japan’s leading department store operators fell sharply in December, highlighting how prolonged geopolitical tensions with China are weighing on the retail sector.  At Daimaru and Matsuzakaya stores of J Front Retailing, duty-free sales plunged 17% year-on-year, dragging overall sales down 1.9% for the month. Takashimaya said tax-free sales declined 11% as inbound spending slumped, partly due to Beijing’s advisory discouraging travel to Japan. The slowdown limited the company’s overall sales growth to 4.1%, despite resilient domestic demand. H2O Retailing said sales from Chinese customers fell about 40% last month due to the reduction of flights from China to Kansai International Airport near Osaka, pushing overall sales down 3.6%. Matsuya reported about an 11% drop at its flagship Ginza store last month, citing the absence of Chinese tourists. Isetan Mitsukoshi Holdings said duty-free sales across its domestic stores fell 14%, pulling total sales down 0.5%. Chinese visitors have been a crucial driver of Japan’s economic recovery since borders reopened after the COVID-19 pandemic, contributing roughly a fifth of the nation’s JPY8.1tn ($51.6bn) tourism revenue. Visitor growth from China slowed in November to its weakest pace in nearly four years, after Beijing curbed travel in response to Prime Minister Sanae Takaichi’s remarks on Taiwan. China has also ordered airlines to reduce flights to Japan through March.