Oct. 28 (Bloomberg) -- Japan’s retail sales fell less than economists forecast in September, adding to signs that consumers may be becoming confident about the resilience of the recovery.

Sales slid 1.4 percent from a year earlier, the Trade Ministry said today in Tokyo, the smallest drop in 10 months. The median estimate of 13 economists surveyed by Bloomberg was for a 1.6 percent decline.

Households had more time to shop this year thanks to a five-day holiday called Silver Week, which bolstered sales at clothing retailer Fast Retailing Co. The government’s 25 trillion yen ($272 billion) stimulus measures implemented to pull the nation out of its worst postwar recession have also fueled sentiment, driving household confidence to a 23-month high in September.

“Consumption-related data has improved over the past few months,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “Consumers are also more confident because they think the worst is finally over.”

The yen traded at 91.50 per dollar at 10:01 a.m. in Tokyo from 91.61 before the report was published.

Sales rose 0.9 percent on a seasonally adjusted basis last month, the third consecutive increase, today’s report showed. The median estimate of seven economists surveyed by Bloomberg was for a 0.2 percent increase.

The holiday was the result of a law created in 2000 that allows national holidays that fall on Sunday to be observed the following day. It added an extra non-working day to September compared with the previous year.

Sales Surge

Some retailers including Uniqlo, which is owned by Fast Retailing Co., reported higher sales spurred by consumers who used the break to shop. Sales surged 31.6 percent in September thanks to the holiday as well as colder weather that bolstered demand, according to the company’s Web site.

“Consumer spending is slowly recovering,” said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management Co. in Tokyo.

Sales of clothing rose 1.7 percent from a year earlier, today’s report showed, while auto sales advanced 4.2 percent.

While industrial production surged for a sixth month in August, those improvements have yet to generate jobs or spur wage increases. The unemployment rate probably rose to 5.6 percent in September from 5.5 percent, a report due Oct. 30 is expected to show, according to the median forecast of 29 economists surveyed by Bloomberg.

Businesses are slashing prices to reach consumers who are cutting back.

Don Quijote Co., a discount store operator, started selling jeans for as little as 690 yen ($7.50) this month. That followed the 850 yen jeans offered by Seiyu Ltd., a supermarket operator owned by U.S.-based Wal-Mart Stores Inc.

Despite signs of weak consumption, Sumitomo’s Takumori says people haven’t stopped making purchases altogether.

Don Quijote’s jeans sold out in most of its stores within the first three days, according to company spokesperson Aya Suzuki.

Today’s retail report mostly captures activity at department stores, supermarkets and convenience stores.

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

Last Updated: October 27, 2009 21:02 EDT