Japan’s Retail Sales in May Unchanged, Showing Weak Recovery

Updated on
  • Compared with a year earlier, sales decline was 1.9%
  • Mini-car sales slump in wake of fuel-economy test controversy

Japan’s retail sales were unchanged in May, underscoring the challenge Prime Minister Shinzo Abe faces in boosting consumer spending and reviving the economy.

Sales were flat in May from the previous month, when they dropped, the trade ministry reported Wednesday. The median forecast of economists surveyed by Bloomberg was for no gain. Favorable factors included sales of machinery and equipment, while sectors including food and beverages were negative.

From a year earlier, sales fell 1.9 percent, compared with a forecast decline of 1.6 percent in the survey. The biggest contributor to the drop was fuels, reflecting declines in oil prices. Even as oil prices have risen recently the level is still lower compared with last year.

The report signals continued weakness in private consumption, exacerbating the risks for an economy that is struggling with a slowdown in exports and business investment. Sentiment among consumers and companies may weaken after Britain’s vote last week to leave the European Union roiled global financial markets, strengthening the yen and pushing down stocks.

Consumer Sentiment

“Consumers aren’t loosening their purse strings, despite a gradual improvement in real income,” Azusa Kato, an economist at BNP Paribas SA in Tokyo, said before the report was released. “Consumer sentiment remains weak as there are uncertainties over the economic outlook.”

The Topix index has dropped more than 10 percent this month, plunging on June 24 with the Brexit vote, the most since the aftermath of the 2011 earthquake. The yen has strengthened more than 8 percent against the dollar this month.

“Private consumption continues to be weak, even as real income is recovering,” Junichi Makino, chief economist at SMBC Nikko Securities Inc. in Tokyo, said after the data was released. “The strengthening yen threatens to worsen corporate earnings."

A slump in sales of mini-cars in the wake of the fuel-economy test controversy also weighed somewhat on retail sales, according to BNP Paribas’s Kato. Motor vehicle sales declined 0.3 percent in May from April, although they rose 3.1 percent from a year earlier, according to the trade ministry’s report. Sales of mini-cars continued to be sluggish, though sales of other passenger cars were firm partly because of new models.

Mitsubishi Motors Corp. last week forecast its first loss in eight years after setting aside compensation costs related to manipulating fuel-efficiency ratings and falsifying test data. Suzuki Motor Corp.’s mini-car sales in Japan were hurt by the company’s admission of using improper fuel-economy testing methods, falling 18 percent in May.

— With assistance by Tomoko Sato

(Updates with factors in second and third paragraphs, Makino comment in seventh paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE