Japanese retail sales resumed falling, and Tokyo consumer prices slid the most in a decade amid slumping energy costs and record COVID-19 cases that kept shoppers home and darken the recovery outlook.
Retail sales fell 2 percent last month from October, as consumers continued to cut back on apparel purchases, the Japanese Ministry of Economy, Trade and Industry reported yesterday.
Analysts had forecast an 0.8 percent decrease. The Japanese government kept its assessment that sales are basically flat.
A separate report showed that Tokyo consumer prices excluding fresh food fell a more-than-expected 0.9 percent, the most since 2010, suggesting deeper declines in national price trends closely watched by the Bank of Japan. The Japanese central bank last week called for a review of its policies so that they are more sustainable, given that the COVID-19 pandemic likely requires stimulus be kept in place for longer.
Other data showed a relative bright spot for Japan’s economy, with the unemployment rate and a key metric of tightness in the labor market improving.
The job numbers are positive for households, but sharp cuts to bonuses at the country’s biggest companies this winter are likely to trigger increased caution in spending.
The retail price data could be just the first indications of renewed weakness in consumer spending, a key driver of Japan’s rebound from its pandemic slump.
The trend is likely to worsen, as COVID-19 has spread rapidly in Japan since the second half of last month, with new confirmed cases rising above 3,000 on two days last week.
“Given the spread of the virus to this level, the government has to set aside thoughts of recovery for now,” said Atsushi Takeda, an economist at Itochu Research Institute Inc. “There’s no use until we can get back to a situation where people can consume without fear.”
Record COVID-19 cases this month forced Japanese Prime Minister Yoshihide Suga to suspend a travel incentive program over the New Year’s holidays, and local leaders are even calling on older people to wear masks at home.
The moves, along with heightened anxiety, will likely hit restaurants, hotels and shops during a key spending season.
Most analysts see growth slowing this quarter to a fraction of the pace in the third quarter, and some are now flagging a risk that the Japanese economy could shrink again early next year.
A US$709 billion stimulus package announced this month by Suga might help, but much of the new spending is for longer-term goals of making the economy more green and digital after the pandemic.
Bloomberg Economics expects Tokyo’s consumer price index to “remain sluggish in January, as stagnating wages and winter bonuses undermine consumption. Beyond that, the price falls should narrow gradually next year as business activity recovers.”
Retail sales rose 0.7 percent compared with the prior year, when consumers were in a funk following a hike to the sales tax. Economists projected a 1.8 percent increase.
A separate report showed that Japan’s unemployment rate improved, falling to 2.9 percent last month.
The jobs-to-applicant ratio rose to 1.06, improving for a second month, the report showed.
The ratio means that job offers outnumbered applicants 106 to 100.
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