Photographer: Tomohiro Ohsumi/Bloomberg

Japan Retail Growth Slows as Wages Continue to Disappoint

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Japan’s retail sales growth slowed in May compared to last year, signaling that consumers are still reluctant to open their wallets.

Highlights of Data

  • Retail sales rose 2 percent in May from a year ago (forecast +2.6 percent), after rising 3.2 percent in the previous month.
  • 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 percent (forecast -1.0 percent) from April, when they rose 1.4 percent.

Key Takeaways

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’s unlikely that consumers will start spending a lot more.

A new consumption index rose 3.7 percent in May from a year ago, a slowdown from April. That’s according to the JCB Consumption Now index, which uses credit card data.

Economist Views

  • "It’s hard to expect consumption to be a driver of growth," said Yasutoshi Nagai, chief economist at Daiwa Securities Co. 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 toward 1 percent, 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 are reflecting the reality."

Other Details

  • Sales at department stores and supermarkets dropped 0.6 percent in May from a year ago (forecast -0.5%).
  • Summer bonuses at major companies were almost 5 percent lower this year compared with last year, according to a preliminary report released by the Japan Business Federation.

— With assistance by Tomoko Sato

(Adds economist’s comment, details from release.)
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