Japan's retail sales up more than expected in December

Tokyo

JAPAN'S retail sales rose more than expected in December as consumers increased spending on clothes and home appliances, which may ease some concern about the outlook for private consumption at a time of growing pressure on the economy.

The 1.3 per cent rise in retail sales in December from the preceding year was more than the median estimate for a 0.8 per cent annual increase and followed a 1.4 per cent gain in November.

Retail sales are a key barometer of the strength of private consumption, which accounts for roughly 60 per cent of the Japanese economy.

December's sales boost was driven by annual spending increases of 4.1 per cent on clothes and 4.4 per cent on appliances, data from the Ministry of Economy, Trade and Industry showed on Wednesday.

Further strength in spending would ease policymakers' concerns about the impact on consumption from a sales tax increase scheduled for October this year.

A sustained rebound in private consumption is far from assured, given a slowing global economy and an unresolved trade dispute between China and the United Sates - Japan's biggest trading partners.

Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities, said: "Consumer spending and household sentiment was strong in the second half of last year. Consumers are expected to front-load spending before the tax hike, but worries about the global economy could cancel this out. I am not overly optimistic about this year."

The Sino-US trade conflict has already shaken up financial markets and depressed global factory activity in a blow to business investment and world growth.

Any sizable declines in Japanese share prices would make it more difficult to justify the sales tax hike.

Chances that Japan will slide into a recession this coming fiscal year have grown over the past three months, a Reuters poll of economists found, pressured by a global economic slowdown and US-China trade friction.

Economists said while Japan will probably manage to avoid a recession in the year starting in April, the median forecast is for only 0.8 percent growth.

That bodes poorly for Prime Minister Shinzo Abe's plans to raise the sales tax (from 8 per cent to 10 per cent in October) to cope with swelling welfare costs as the country's population ages.

Japan has felt the indirect impact of the US-China trade war because it makes equipment and supplies used by Chinese manufacturers of semiconductors, mobile phones and other products.

On a seasonally-adjusted basis, retail sales rose 0.9 per cent in December versus a revised 1.1 per cent decline in the previous month.