Photographer: Kiyoshi Ota/Bloomberg

Japan’s Retail Sales Decline for First Time in Three Months

Japan’s retail sales fell for the first time in three months, signaling that consumer spending is struggling to maintain traction.

Key Points

  • Retail sales fell 1.1 percent in August from the previous month, when they rose 1.5 percent, according to a trade ministry report released on Thursday.
  • The median forecast of economists surveyed by Bloomberg was for a 0.6 percent drop.
  • Compared with a year earlier, they fell 2.1 percent (forecast -1.7 percent).
  • Sales of department stores and supermarkets fell 3.6 percent from a year earlier (forecast -2.6 percent).

Big Picture

The latest figures underscore the challenge Prime Minister Shinzo Abe faces in stoking economic growth and inflation. Even with the unemployment rate at the lowest level in years, slow growth in wages is limiting consumer spending, which accounts for about 60 percent of Japan’s economy. The release on Friday of data for employment, household spending, industrial production and inflation will give a more complete picture of how the economy performed last month.

Economist Takeaways

  • Bad weather and fewer weekends in August were largely to blame for the downbeat results, said Junko Nishioka, chief economist for Japan at Sumitomo Mitsui Banking Corp. in Tokyo. She cautioned against an overly pessimistic view, noting that sales of automobiles remained solid compared with a year earlier. 
  • "The labor market will likely continue to recover, but it doesn’t look like the improvement will accelerate," Nishioka said. "Private consumption will probably stay flat in the months ahead."
  • Junichi Makino, chief Japan economist at SMBC Nikko Securities Inc., said sales of durable goods are picking up from a long slump that followed a sales-tax increase in April 2014. Sales of non-durable goods such as food and daily commodities will likely recover as a stronger yen pushes down import prices. 
  • "Private consumption will likely continue to recover gradually,” Makino said.
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