Japan's retail sales unexpectedly slump in challenge to Abe

[TOKYO] Japanese retail sales unexpectedly fell in December, underscoring challenges to Prime Minister Shinzo Abe's effort to stoke a recovery in the world's third-biggest economy.

Sales slid 0.3 per cent from November for a third straight monthly decline, the trade ministry said Thursday in Tokyo. That compared with the median estimate for a 0.3 per cent gain in a Bloomberg News survey. Sales increased 1.7 per cent in 2014.

A recovery in consumer spending that was hurt by last year's sales-tax increase is needed to help spur the economy. Talks between business and labour leaders this spring will determine the extent of pay gains that could offset rising living costs for consumers.

"The recovery in domestic consumption after the sales-tax hike is much slower than expected," said Koya Miyamae, an economist at SMBC Nikko Securities Inc. "As a stable rise in real wages is still not expected, people won't be able to loosen their purse-strings." Japan's economy fell into recession last year following a 3 percentage point increase in the sales tax in April aimed at containing the world's heaviest debt burden.

BLOOMBERG