Japan retail sales fall sharply in May as lockdown measures hit demand

People look at clothes in an Aeon shopping mall in Chiba on May 28, 2020. PHOTO: REUTERS

TOKYO (REUTERS) - Retail sales in Japan tumbled at a double-digit pace for the second straight month in May as the coronavirus pandemic and lockdown measures delivered a heavy blow to consumer confidence.

The sustained downturn in demand raises risks that the world's third-largest economy could remain mired in recession longer than expected and a recovery may be more sluggish.

Retail sales fell 12.3 per cent in May from a year earlier, pulled down by a slump in spending on big ticket items such as cars as well as clothing and general merchandise, trade ministry data showed on Monday (June 29).

The decline followed a 13.9 per cent drop in April, which was the biggest fall since March 1998, and was worse than a 11.6 per cent fall forecast by economists in a Reuters poll.

Policymakers are hoping a rebound in private spending, which accounts for more than half of the economy, will help support growth as uncertainty over the global demand outlook threatens to delay a recovery.

Some analysts say cash payouts of 100,000 yen (S$1,300) per citizen in response to the pandemic could fuel a bout of "revenge spending" following the lifting of a state of emergency in May and as more people get used to social distancing measures, which remain in place in crowded areas.

Midori, a 29-year-old worker at an electric instrument maker who declined to give her last name, said only one of her friends has received the government payout so far.

"I think consumption will decline compared to before the coronavirus outbreak," she said on Saturday while going shopping in Yokohama, adding that she plans to invest part of the cash handout and spend the rest on daily life essentials.

The economy is forecast to contract by more than 20 per cent on an annualised basis this quarter, marking the third straight quarter of decline, with business activity hit by lockdown measures from April through late May.

Some analysts fear uncertainty about the economic outlook following the virus outbreak and a nationwide tax hike in October last year could make consumers save more and spend less, with more people working from home.

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