Japan’s retail sales fell more than expected in May in a third straight month of annual declines, data showed on Wednesday, keeping policymakers under pressure for more stimulus to support a fragile economic recovery.
Retail sales fell 1.9 percent in May from a year earlier, more than a median market forecast for a 1.6 percent declines, data from the Ministry of Economy, Trade and Industry showed.
The weak reading underscores the relative fragility in Japan’s economy, with slow wage growth and gloomy prospects of recovery weighing on household spending.
“Consumer spending has been stagnant and the trend is likely to continue for a while due to sluggish growth in wages,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“A strong yen will push down import prices, which would be positive for consumers. But the yen’s rises would hurt exports, corporate earnings and capital spending,” he said.
The ministry maintained its assessment that retail sales were weakening as a trend.
The market turmoil in the wake of Britain’s vote to leave the European Union adds to headaches for Japanese policymakers worried about the drag the yen’s recent rises could have on exports.
“Uncertainty and risks remain in financial markets,” Prime Minister Shinzo Abe told a meeting held Wednesday morning with Finance Minister Taro Aso and Bank of Japan Governor Haruhiko Kuroda to discuss financial market developments.
Japan stepped up threats to intervene to weaken the yen after the “Brexit” vote drove the currency to multi-year highs, but the risks of a costly failure may dissuade policymakers from matching words with action.
The Bank of Japan (BOJ) is also wary of rushing into expanding its monetary stimulus, preferring to wait and see if the market turmoil lasts long enough to threaten Japan’s economic recovery, sources say.
That puts the onus on the government, which is willing to spend at least 10 trillion yen ($97.6 billion) on a stimulus package that will include assistance for small businesses hurt by the jump in the yen.
($1 = 102.4200 yen)
Source: Reuters
