Japan's Nov retail sales rise but Omicron risks loom

Tokyo

JAPAN'S retail sales rose faster than expected in November - thanks to decreasing Covid-19 cases in the month, which have encouraged shoppers to ramp up spending on goods and services.

To support the economy, Japan's Parliament last week passed a US$317 billion extra budget that includes payouts to families and businesses hit by the pandemic while the government approved a record US$940 billion budget for fiscal 2022.

Prospects of a consumption-led recovery, however, are clouded by uncertainties around the Omicron coronavirus variant, which started to spread in the community last week in Japan's largest cities.

"So far, consumers have not been too concerned with Omicron as foot traffic data still shows increase," said Masato Koike, senior economist at Dai-ichi Life Research Institute.

The government said last Thursday (Dec 23) that it was not considering immediate changes to domestic Covid-19 restrictions due to Omicron.

"But if new infections jump . . . there is a risk, or a likelihood at this point, that consumption will be suppressed by the Omicron," Koike said, adding returning travellers during the holiday season could spread infections.

Retail sales gained 1.9 per cent in November from a year earlier, government data showed on Monday, faster than economists' median forecast for a 1.7 per cent gain and the 0.9 per cent advance in October.

Fuel sales rose 29.2 per cent in November from a year earlier, thanks to soaring commodity prices, pushing up the overall retail trend.

Car sales fell 14.1 per cent due to supply bottlenecks and electronics sales declined 10.6 per cent with diminishing demand for stay-at-home appliances.

Compared with the previous month, retail sales increased

1.2 per cent in November on a seasonally adjusted basis, after a downwardly revised 1 per cent rise in October.

After the government lifted curbs in September, nationwide daily Covid-19 cases in Japan fell to fewer than 1 per 1 million people earlier this month.

No restrictions have been reinstated, other than strict border controls to stop the spread of Omicron.

The world's third-largest economy is set to rebound by an annualised 6.1 per cent in the current quarter from a 3.6 per cent slump in July-September, showed the latest Reuters poll of economists. REUTERS