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Japan retail sales jump the most since 2014, outlook murky

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Japanese retail sales grew the most in 5-1/2 years in September, boosted by consumers accelerating spending to beat a national sales tax hike that kicked in this month, raising some concerns about a subsequent pullback in demand in the coming months.

[TOKYO] Japanese retail sales grew the most in 5-1/2 years in September, boosted by consumers accelerating spending to beat a national sales tax hike that kicked in this month, raising some concerns about a subsequent pullback in demand in the coming months.

Japan implemented sales tax hike to 10 per cent from 8 per cent on Oct 1, in a move seen as crucial for fixing the industrial world's heaviest public debt at more than twice the size of its economy.

But some analysts worry the twice-delayed tax hike could tip the economy into recession.

Retail sales jumped 9.1 per cent in September from a year before, boosted by increased demand for cars, household appliances, cosmetics and clothing, data by the trade ministry showed on Wednesday.

It handily beat a 6.9 per cent gain expected by economists in a Reuters poll, posting the fastest annual growth since March 2014 when retail sales jumped 11 per cent one month before the previous tax hike.

Seasonally-adjusted retail sales grew 7.1 per cent month-on-month in September, the data showed. The surge in spending ahead of sales tax hike bodes ill for fourth-quarter private consumption, although it may help push up economic growth in the last quarter, analysts say.

"The data released today suggest that private consumption may have risen by 1.5 per cent quarter-on-quarter in the third quarter," Marcel Thieliant, senior Japan economist at Capital Economics, said. "The risks to our forecast of a 1.7 per cent quarter-on-quarter drop in consumption in the fourth quarter are probably tilted to the downside."

The previous tax hike to 8 per cent from 5 per cent triggered a deep slump in private consumption and the broader economy as a big pull-back in demand followed the last-minute buying by consumers ahead of the hike.

Policymakers maintain that such a big swing in demand has not occurred by the tax hike this time, given the smaller extent of the hike and various steps the government has taken to level out consumer demand.

REUTERS