Hermes Chairman Jean-Louis Dumas outside the new store

The bag costs $4,000, and even then there is a lengthy waiting list.

Hermes hopes that the store, in the fashionable Ginza district where property prices are among the highest in the world, will contribute to a 10% rise in yen sales for 2001.

The Japanese economy is flirting with recession, and retail spending overall is falling because of fears of mounting bankruptcies and a corresponding rise in unemployment.

But luxury goods chains like Hermes are fairing better than most.

We've established a record with Japanese clients. There's been no year when we haven't seen an increase in turnover in Japan

Jean-Louis Dumas Hermes Chairman

Hermes chairman Jean-Louis Dumas said Japanese customers were their most loyal clients, accounting for 25% of global turnover. France brings in just 17%.

Hermes has increased its turnover for every one of the last 40 years it's been in Japan. And overall, the Japanese account for 40% of luxury goods purchases worldwide.

But away from luxury goods, it's a different story.

Economy

Japanese domestic retail sales fell 1.6% in May from a year earlier, marking a second straight month of decline.

Shoppers queued overnight to get in

Sales at larger stores, which are particularly sensitive to changes in consumption, have fallen for 37 consecutive months.

With consumer spending accounting for about 60% of the economy, such data further underscores the huge task facing Prime Minister Junichiro Koizumi, who is pinning his hopes on painful structural changes to pull the world's second-largest economy out of a decade of stop-go growth.

Meanwhile other luxury goods retailers continue to be attracted to Japan because of the demand for their goods.

Britain's Burberry, Italy's Prada and Louis Vuitton have all opened new shops in Tokyo's most expensive shopping areas.