Japan retail sales rise modestly, consumption outlook murky

A woman and her children walk past a display window outside a luxury brand store at Tokyo's Ginza shopping district, Japan, July 20, 2015.
A woman and her children walk past a display window outside a luxury brand store at Tokyo's Ginza shopping district, Japan, July 20, 2015.PHOTO: REUTERS

TOKYO (REUTERS) - Retail sales in Japan rose 0.9 per cent in the year to June but the pace of growth slowed for a second straight month, a sign consumer spending has yet to build enough momentum to be a key driver of economic growth.

While food and beverage sales increased, bad weather during the month hurt clothing sales at department stores, government data showed on Wednesday.

"Rises in bonus payments were smaller than last year and there were more rainy days than usual this month, so people didn't spend their bonuses that much," said Junichi Makino, chief economist at SMBC Nikko Securities.

June's annual increase was bigger than a median market forecast for a 0.5 per cent gain, though the year-on-year rise is exaggerated by a sharp slump in consumption after the April 2014 sales tax hike.

Retail sales fell 0.8 per cent in June from the previous month, underlining the weakness in private consumption.

Japan's economy emerged from last year's recession as a weak yen boosted manufacturers' profits, prompting them to gradually spend more on wages and investment.

But exports and household spending have failed to gain momentum, leading many analysts to project flat or slightly negative economic growth for the April-June quarter.

The Bank of Japan expects a tightening job market will lead to more wage gains and prop up consumption, though some policymakers fret that rising food and grocery costs could dent spending.