Japan’s retail sales dropped at the fastest pace in at least 14 years last month after the first consumption-tax increase since 1997 depressed consumer spending.
Sales last month declined 13.7 percent from the previous month, the trade ministry reported yesterday, more than the median forecast of an 11.7 percent decline in a Bloomberg News survey of 11 economists.
The drop-off follows a consumer splurge in March ahead of the 3 percentage point tax increase that began on April 1. The data highlight the difficulties Japanese Prime Minister Shinzo Abe faces in steering the world’s third-largest economy through a forecast contraction this quarter.
“Today’s data suggest that the government and the Bank of Japan are too optimistic in their view that the fall-off in demand is within expectations,” said Yoshimasa Maruyama, chief economist at Itochu Corp in Tokyo. “Even so, the economy should be able to withstand the drop in consumption.”
The TOPIX stock index was down 0.2 percent as of 9:35am yesterday, but rose to gain 0.21 percent by the end of Tokyo trading. The yen rose 0.1 percent against the dollar to ￥101.73.
Sales last month fell 4.4 percent from a year earlier, with drops in all sectors, including motor vehicles, clothing and food and beverages.
The economy is forecast to shrink an annualized 3.4 percent this quarter after 5.9 percent growth in the first three months of the year. Even so, gauges of business spending to consumer sentiment indicate the setback could be fleeting.
Machinery orders — a leading indicator of private capital expenditure — rose at the fastest pace since 1996 in March and companies plan further increases this quarter.
A measure of sentiment on Japan’s economic outlook among taxi drivers, restaurant staff and other workers soared by a record last month, Japan’s Cabinet Office said.
A “recovery in household spending will resume in the second half of the year,” Marcel Thieliant, a Singapore-based economist at Capital Economics, wrote in an e-mailed note. Consumer price inflation should start to moderate soon and wage growth has shown signs of picking up, he wrote.
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