Japan's retail sales growth slows

Sales in Japan fell 1.6 per cent last month from April. With wages stagnant or falling for years, growth in spending has been weak, and without a rebound in pay, it is unlikely that consumers will start spending a lot more.
Sales in Japan fell 1.6 per cent last month from April. With wages stagnant or falling for years, growth in spending has been weak, and without a rebound in pay, it is unlikely that consumers will start spending a lot more.PHOTO: REUTERS

TOKYO • Japan's retail sales growth slowed in May compared with last year, signalling that consumers are still reluctant to open their wallets.

Retail sales rose 2 per cent last month from a year ago after rising 3.2 per cent in April.

The biggest contributors to the rise were purchases of motor vehicles, followed by fuel, medicine and toiletries, according to the Economy Ministry. 

Measured month on month, sales fell 1.6 per cent from April, when they rose 1.4 per cent.

Japan's economy has had a five-quarter run of growth, propelled by improving exports and firming domestic demand.

But with wages stagnant or falling for years, growth in private spending has been weak, and without a rebound in pay, it is unlikely that consumers will start spending a lot more.

But in a show of confidence in the recovering economy, the Bank of Japan upgraded its assessment of private consumption for the first time in six months at its meeting this month, when it kept monetary policy steady.

A new consumption index rose 3.7 per cent last month from a year ago, a slowdown from April. That is according to the JCB Consumption Now index, which uses credit card data.

The government has also raised its overall view of the economy for the first time in six months because of the growth in private consumption.

However, economists give a different perspective.

"It's hard to expect consumption to be a driver of growth," said Mr Yasutoshi Nagai, chief economist at Daiwa Securities in Tokyo. "You see many stores are cutting prices because they can't sell their goods.

"The pace of wage growth is slow, and I think inflation will pick up towards 1 per cent, which will make real earnings fall and weigh on real consumption," he said. 

"As online sales increase, I'm not sure how much the data is reflecting the reality."

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A version of this article appeared in the print edition of The Straits Times on June 30, 2017, with the headline 'Japan's retail sales growth slows'. Print Edition | Subscribe