TOKYO -- Shares of companies reliant on spending by foreign tourists in Japan slid Monday as a strengthening yen spurred concerns of tightening purse strings.
The currency appreciated to as far as the 111 level against the dollar, weighing exporter shares down. Domestically focused companies were rather resistant to the market decline. But many that have generated strong earnings by serving visitors from overseas suffered sharper drops than the Nikkei Stock Average's 0.9%.
"If the yen continues to strengthen, more investors may shun inbound tourism stocks," a Mizuho Securities official said.
Visitors to Japan are on the rise and expected to reach a record high this year. But their October-December spending was up just 1% on the year at 892.2 billion yen ($7.95 billion), according to the Japan Tourism Agency.
China has raised customs duties on high-value items purchased abroad. Tax-free-store operator Laox, whose home appliance sales have slowed, sustained its first annual net loss in three years in 2016. "A boost from a soft yen is necessary to reignite hopes of spending by foreigners," the Mizuho Securities official said.
These so-called inbound stocks have languished from the end of last year, when the Japanese currency was around 117 against the greenback.
Laox has slid 9.5% since the close of 2016. Discount store operator Don Quijote Holdings and electronics maker Casio Computer have declined 8.6% and 8.3%. Major department stores are above year-end levels but top-heavy. The Nikkei average is at the same level as at the end of 2016.
But as foreign tourists' spending shifts away from goods and toward experiences, such service-focused stocks as hotel and restaurant companies are drawing investors.
"The outlook for visitors' high-end spending is difficult to gauge, but service- and experience- focused stocks are expected to enjoy medium- to long-term profit growth," said Tadao Kimura of Sumitomo Mitsui Asset Management.