Luxury brands are concerned, to put it mildly, about what’s happening in Japan. Japanese shoppers, at home and abroad, account for about half of the global luxury-goods market. But according to a study released last fall by Bain & Company, the luxury market here was expected to shrink by 7 percent in 2008, after falling by 2 percent the previous year.

Part of the problem is plain old economics—a sharp contraction following prolonged economic stagnation. Last year, Japanese department stores posted their 12th consecutive year of declining sales. Responding to the dog years of the 1990s and the bursting of the tech bubble, many Japanese companies have replaced full-time workers with temporary ones. In 2007, nearly 40 percent of Japanese workers were employed in non-staff (contract or part-time) positions, according to the Ministry of Health, Labor, and Welfare. A growing proportion of young people once blessed with steady incomes are now “freeters,” people who float from job to job.

These circumstances are prompting deeper behavioral shifts. In a country renowned for its after-work drinking, for example, 34 percent of the 20-somethings surveyed by the Nikkei Marketing Journal in 2007 said they never or hardly ever drank alcohol. The same poll found that the number of Japanese in their 20s who were saving money “to prepare for the future” had doubled between 2000 and 2007.

Sakurai and other observers believe Japanese people have changed their attitude toward luxury consumption. In the bubble years of the 1980s and early 1990s, many Japanese aspired to own the same Western brands—not to stand out, but rather to fit in. Some 40 percent of Japanese consumers reportedly own a product from Louis Vuitton, whose parent company derives almost 10 percent of its revenue from Japan.

The collapse of the bubble economy in Japan and the “lost decade” of decline that followed left everyone a little wiser. “Japanese consumers were like a sponge,” Chanel’s Sakurai told me. “We absorbed everything, and then we got wrung out. We’re not going to absorb the same things as we used to.” What sells today is value. When the Swedish discount fashion retailer H&M opened its first Japanese outlet in September, more than 5,000 people waited on line.

Today, “it’s not about how much money you have,” Sakurai said. “It’s about expressing your own personal style.”

For young Japanese, as for youth everywhere, the more that personal style differs from their parents’, the better. Junpei Kosaka, a 26-year-old advertising executive, can afford to buy luxury brands but chooses not to. Brands like Armani, he sniffs, are “for rich old dandies.”