Japan's August retail sales slip renews pressure on policymakers

[TOKYO] Japan's retail sales fell more than expected in August for the sixth straight month of annual declines due to falling sales of clothes and home appliances - keeping policymakers under pressure to find ways of beefing up household spending.

Retail sales fell 2.1 per cent in August from a year earlier, more than a median market forecast for a 1.8 per cent annual decline, data from the Ministry of Economy, Trade and Industry showed on Thursday.

The weak reading underscores the relative fragility in Japan's economy, with slow wage growth and gloomy prospects of recovery weighing on household spending.

"I don't expect consumer spending to continue falling but future gains are likely to be very modest," said Hiroaki Muto, economist at Tokai Tokyo Research Center.

"The government has already got the stimulus package it wanted. We need to see more incoming data to determine if the situation is bad enough to force the Bank of Japan to lower its assessment of consumption."

Retail sales fell 1.1 per cent from the previous month, the first decline in three months, the data showed.

Japan's economy grew faster over April-June than initially estimated due to upward revisions to capital expenditure and inventories, but there are concerns from a recent run of weak data on exports, factory output and household spending.

The parliament will soon start to deliberate a government stimulus package with planned spending of 7.5 trillion yen (S$101.5 billion) by the national and local governments on infrastructure projects in an attempt to boost domestic demand.

Economists say the package, which is sure to be passed in parliament, could support growth but still worry whether wages will rise fast enough to spur consumer spending.

The BOJ overhauled its policy framework last week to focus on controlling interest rates after more than three years of aggressive money printing failed to ignite inflation.

The new framework could face its first major test when the BOJ updates its economic forecasts in early November, some economists say.

REUTERS