Japan's retail sales sag for 13th month, outlook murky

Japanese retail sales fell 1.4 percent in September from a year earlier, marking the 13th straight month of declines, underlining stagnant consumer spending as households tighten their belts in the face of job cuts and falling incomes. Personal consumption, which makes up 60 percent of the economy, is barely holding up on the back of government stimulus measures as Japan has crawled out of its worst recession since World War Two.
The economic recovery so far has been backed mostly by a pick-up in exports and restocking of inventories. The drop in September's retail sales was slightly smaller than a median market forecast for a 1.6 percent annual decline and followed a 1.8 percent drop in the previous month. Flat-panel televisions and fuel-efficient automobiles enjoyed sales growth thanks to government incentives, helping limit the overall fall.
Economists say recent retail sales have not been as bad as the figures show on a nominal basis, but the outlook remains unclear as stimulus schemes run their course and companies cut winter bonuses. Taking price declines into account, retail sales have turned positive since June thanks in part to the government subsidies on energy-efficient cars and appliances, said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute.
"The personal consumption component of GDP may have grown in July-September as much as the previous quarter," Shinke said. The world's second-biggest economy grew 0.6 percent in the second quarter from the previous three months thanks to a rebound in exports and output, after a full year of sharp contractions, the longest such spell on record. A Reuters poll showed the economy may post no growth in the first three months of 2010 due to cuts in public spending under the new Democratic Party-led government and weak private consumption.
The Democrats, after sweeping to power in August, have vowed to put more money in the hands of households by turning an export-driven economy into one led by domestic demand. But investors worry about worsening public finances given a likely plunge in tax revenues due to the economic slump and the government's plans for additional spending of some 7 trillion yen ($76 billion) on policies such as child benefits and lower highway tolls.