Spending in Japan by international visitors increased in 2014, with tourists reportedly spending 2.03tn yen on souvenirs ranging from premium goods to cosmetics.
Tourist spending is estimated to contribute about 1% to Japan's department stores' sales.
Just last year, the government announced that certain cosmetics purchases would soon be tax-free for foreigners visiting the country to increase spending.
Foreign tourists can have consumption tax refunded on purchases up to ¥5,000 ($48) at designated tax-free shops on the provision they provide their passports.
A researcher at Japan Tourism Marketing, Yoko Hayano reports relatively unknown destinations are starting to get a look, including Hokkaido and Hokuriku, and estimates overseas visitors to Japan to likely increase to 21.6m in 2020 from 13.4m in 2014.
Cosmetics buyers among the highest spenders
The Agency also revealed that 38.5% of tourists who visited Japan bought cosmetics and pharmaceuticals, making them the third most commonly bought item after food and confectionery.
The average amount spent on cosmetics and pharmaceutical products was ¥20,270 (USD $205.52). Visitors from China were the highest spenders, with 68.4% purchasing and an average spending of ¥34,521 (USD $350.01).
Taiwan and Thailand tourists also featured prominently in purchasers of cosmetics, with 62.8% and 42.3% purchasing and average spending being ¥16,406 and ¥15,921 respectively.
The same study revealed that 3% of the ¥1.09tn spent by tourists each year was allocated to shopping.
Retailers need to be more 'tourist friendly' to reap real benefits
Revenue from Japan's inbound tourism trade is expected to reach about 3.8tn yen in 2020, as not only per capita expense but also the number of travelers is projected to grow.
Analysts say that to tap into potential buying power, stores in Japan need to be more tourist-friendly.
"There are about one million retailers in Japan, but at last count just 9,300 stores, or less than 1%, were tax-free."
Regional publication, asia.nikkei.com reports Kenichi Niitsu, senior managing director of Japan Shopping Tourism Organization to be concerned that most domestic retailers are not ready to welcome foreign shoppers.
"Only a few of them can serve foreign customers in English," it quoted Niitsu as saying.