The Profit Structure and Pricing Strategy of Japanese Sword Retail — Business Practices from Procurement to Sale

Japanese sword retail, like other secondhand dealing businesses, is a trade sustained by the margin obtained between the purchase and sale of acquired items. However, the goods handled are works of art underpinned by the firearms and swords registration system and sword appraisal examinations, and there are unique mechanisms governing procurement and sales procedures and how prices are determined. This article organizes, in accordance with official sources, the permits required for sword dealers, procurement channels, factors affecting price, procedures at the time of sale and export, and pre-sale maintenance. Industry-wide figures such as profit margins are not addressed, as no official statistics can be found.

Permits Required for Sword Dealers — The Secondhand Articles Dealer Act

The business of purchasing and selling used swords constitutes secondhand dealing, requiring a permit from the Public Safety Commission (secondhand dealer permit). Secondhand goods are divided into 13 categories, and registered swords are listed as an example of the "works of art" category alongside paintings, calligraphy, sculptures, and craft works (Yamanashi Prefectural Police, "Guide to Secondhand Articles Dealer Regulations").

Secondhand dealers are subject to three obligations: verifying the identity of trading parties, keeping records of transactions, and reporting to police officers when illicit goods are discovered (Saga Prefectural Police, "Obligations Imposed on Secondhand Dealers"). In the purchase of swords as well, verifying the counterparty's identity and recording the transaction are the fundamental procedures.

Main Procurement Channels

• Purchase from individuals: Purchasing swords surrendered through inheritance or estate clearance upon consultation
• Secondhand goods markets: Markets where secondhand dealers buy, sell, and exchange goods with each other, typically conducted by auction (Aichi Prefectural Police, "Guide to the Secondhand Articles Dealer Act")
• Consignment sales: Receiving swords on consignment from owners and collecting a commission upon sale
• Newly made swords: Commissioning swords from contemporary tōshō or handling the works of tōshō

In any of these channels, swords are transferred together with their registration certificates. Confirming the presence of the registration certificate and comparing its recorded details (type, length, sori, mekugi holes, mei inscription, etc.) against the actual sword constitutes the first check at the time of procurement.

Factors Affecting Price

The price of a sword is determined by the conditions of each individual piece. The main factors are as follows.

• Maker, period, and mei: Whose work it is, when it was made, and whether it bears a mei (zaimei or mumei)
• Condition: Presence of edge chips, rust, or flaws; the state of the togi; and the degree of loss from polishing
• Appraisal: NBTHK (Society for the Preservation of Japanese Art Swords), a public interest incorporated foundation, examines swords, mountings, and tōsōgu at four levels: "Hozon," "Tokubetsu Hozon," "Jūyō," and "Tokubetsu Jūyō." Only those that have passed Tokubetsu Hozon may apply for Jūyō Tōken examination, and only those that have passed Jūyō may apply for Tokubetsu Jūyō Tōken examination (NBTHK, "Examination Process")
• Accessories: Presence and condition of koshirae, shirasaya, habaki, and sayagaki
• Dimensions and form: Nagasa, sori, mihaba, kasane, and presence of suriage

Types of kanteisho and how to read them are covered in Types of Sword Kanteisho and Their Reliability, handling of sayagaki in What Is Sayagaki?, and how to read dimensions in Standards for Measuring Blade Thickness and Width.

Even for swords by the same maker, the assessment can vary greatly depending on condition, appraisal level, and accessories. When setting a price, the basic approach is not to judge by the maker's name alone but to verify each of these factors for every individual sword.

Procedures at the Time of Sale — Notification of Change of Ownership

When a sword is sold, the sword and its registration certificate are transferred together to the buyer. When ownership changes through transfer or inheritance, the new owner must notify the Board of Education of the prefecture where the sword was registered within 20 days (Kanagawa Prefecture, "On Firearms and Swords Registration Procedures"). In the case of Tokyo, the notification is submitted by post with a copy of the registration certificate enclosed (Tokyo Metropolitan Board of Education, "Procedures for Change of Owner or Address").

It is the buyer who files the notification, but advising them of the notification procedure at the time of sale can prevent procedural omissions. The details of the procedure are summarized in Guide to Nihontō Registration Certificates.

Sales to Overseas Buyers — Export Procedures

When exporting a registered sword, it is necessary to obtain an "Antique Art Export Inspection Certificate" from the Agency for Cultural Affairs. Kokuhō (National Treasures) and jūyō bunkazai (Important Cultural Properties) cannot in principle be exported. At the point of taking the sword out of the country, the registration certificate becomes invalid, and there is an obligation to return it to the Board of Education that issued the registration (Tokyo Metropolitan Board of Education, "When Exporting Firearms and Swords").

Since regulations in the importing country vary by country, when selling to overseas buyers it is necessary to confirm in advance with the buyer what the regulations of the destination country are. The flow of procedures is covered in detail in How to Take Nihontō Overseas.

Pre-Sale Maintenance and Associated Work

Swords acquired through procurement are not necessarily in a condition ready for sale as they are. If there is rust or haziness, togi is commissioned from a togishi; if the saya is damaged, a new shirasaya is commissioned from a sayashi; for the habaki, a shirogane-shi is called upon — each task is entrusted to the respective specialist craftsman. How much work to commission is decided by weighing the sword's condition and value against the cost and time required for the maintenance. Points to check before commissioning togi are covered in What to Know Before Asking a Togishi.

Whether to submit the sword for appraisal examination is also one of the judgments to make before sale. Since examination involves scheduling and costs, and the assessment changes depending on the result, the decision must be made by judging whether it is commensurate with the quality of the sword.

Summary

The profit in sword retail comes from correctly assessing the value of acquired swords, performing necessary maintenance, and selling at appropriate prices. Correctly operating the systems involved — the three obligations of the Secondhand Articles Dealer Act, the notification of change of ownership under the firearms and swords registration system, and the Antique Art Export Inspection Certificate at the time of export — forms the foundation of credibility as a sword dealer.