Japan retail sales rise for a third month

Japan retail sales rise for a third month
By Justine Lau in Hong Kong
Copyright The Financial Times Limited 2010
Published: April 28 2010 06:41 | Last updated: April 28 2010 06:41
http://www.ft.com/cms/s/0/e990ff6e-527f-11df-8b09-00144feab49a.html


Japan’s retail sales grew at their fastest rate in 13 years last month as government stimulus measures continued to spur domestic demand, offsetting the negative impact of lingering deflation and weak consumer confidence.

In March, retail sales expanded 4.7 per cent from the same period a year ago, the fastest since March 1997, according to Bloomberg. This growth, which followed a 4.2 per cent rise in February, was the third straight month of increase after retail sales fell for 16 months since September 2008.

On a seasonally adjusted, month-on-month basis, retail sales increased 0.8 per cent in March, compared with a 0.9 per cent expansion in February.

Japan is still labouring under wage deflation and confidence is generally low. According to the Cabinet Office, the consumer confidence index for households rose to 40.9 in March, compared with 39.8 in February, but it was still significantly below the neutral level of 50, which signals equal numbers of optimists and pessimists.

However, the government’s fiscal stimulus measures have been encouraging spending in such categories as motor vehicles, household machinery and clothing.

Rebounding exports, due to strong external demand for Japanese goods – a main driver of the economy – is also spilling over into the rest of the economy.

Economists said spending would still be strong in the coming months thanks to continuous subsidies from the government and improving labour market conditions. The unemployment rate, which stood at a 10-month low of 4.9 per cent in February, is expected to remain unchanged in March.

But Nikhilesh Bhattacharyya, associate economist at Moody’s Economy.com, warned: “Consumer confidence remains weak and household expenditure survey data show that many families are increasing their average propensity to save, which will weigh on consumption over coming quarters even as employment conditions improve.”