Japan Retail Sales Rise 2.9% in April, Aided By Wages (Update6)
Japan Retail Sales Rise 2.9% in April, Aided By Wages
May 27 (Bloomberg) -- Japan's retail sales rose faster than economists expected in April as higher wages and brighter job prospects prompted consumers to increase spending.
Sales rose a seasonally adjusted 2.9 percent from March, led by cars and clothing, the Ministry of Economy, Trade and Industry said today in Tokyo. That exceeded the most optimistic forecast of four economists surveyed by Bloomberg.
Retailers including Aeon Co. and Ito-Yokado Co. are forecasting higher sales on improved growth prospects in the world's second-largest economy. Consumer spending, which accounted for half of the 5.3 percent annualized pace of expansion in the first quarter, may help extend a rebound from last year's recession.
``It's quite good news for Japan,'' said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. ``Wages and employment have been falling for years, so people remain very price-conscious here, but they are gradually returning to department stores.''
Shares of retailers gained. Yamada Denki Co., Japan's biggest electronics retailer, rose 0.9 percent at 2:40 p.m. in Tokyo. The yield on the government's benchmark 1.3 percent bond due in March 2015 rose 1 basis point, or 0.01 percentage point, to 1.250 percent.
A separate government report today showed deflation entered its eighth year. Core consumer prices, which exclude fresh food, fell 0.2 percent in April from a year earlier, the statistics bureau said.
Bank of Japan
Bank of Japan Governor Toshihiko Fukui vowed to keep the bank's four-year-old policy of holding interest rates near zero and pumping money into the economy until core prices stop falling and policy makers are sure they won't resume their slide.
``The most pressing task for the Bank of Japan at this moment is to achieve stable growth on the basis of price stability,'' Fukui said in a speech today at meeting organized by the Bank of Korea in Seoul. ``Toward that goal, the BOJ is firmly committed to maintaining the current easing policy.''
Sales of motor vehicles gained a seasonally adjusted 12.9 percent in April, and clothing and accessories rose 3.3 percent, today's report showed.
Four economists in a Bloomberg survey forecast sales would gain 0.5 percent, according to the median estimate. The highest forecast was for a 1.5 percent increase. From a year earlier, sales rose 3.9 percent to 10.9 trillion yen ($101 billion.)
Nissan Motor Co., Japan's second-largest automaker, had a 19.6 percent gain in domestic vehicle sales last month, according to a Japan Automobile Dealers Association report on May 2. Toyota Motor Corp., the world's second-largest carmaker, had a 14 percent increase.
Recovery
Aeon, Japan's largest retailer, last month forecast sales will rise 3.4 percent in the fiscal year started March 1. Ito- Yokado, the nation's No. 2 retailer, expects sales to gain 2.1 percent this fiscal year.
``There have been some clear improvements in wages and labor, and that's helping support consumer spending,'' Yoshinori Nagano, who helps manage about $68 billion at Daiwa Asset Management Co. in Tokyo, said before today's release. ``It would be premature to be overly optimistic about the retail sector, but the outlook is decent.''
Japan's economy is pulling out of its fourth recession since 1991. Manufacturers including Sharp Corp. are increasing investment to make liquid crystal display televisions, and consumers are spending more as the unemployment rate hovers near a six-year low of 4.5 percent.
Baby Boomers
Wages have dropped an average 0.2 percent in the past year, compared with an average 0.9 percent decline in the previous year, according to labor ministry statistics. Winter bonuses in 2004 rose for the first time in eight years.
The aging population in Japan may also help support consumer spending, as retirees leaving the workforce make more jobs available, said economist Takehiro Sato at Morgan Stanley in Tokyo.
``We may see a squeeze in the labor market as the baby boomers retire and leave the workforce,'' Sato said. ``Over the medium term, this means that companies who have been hiring part- time staff to cut costs during the recessions will have to replace them as full-time staff, which should translate to higher salaries and stable consumer spending.''
Still, Sato and economist Seiji Adachi at Deutsche Securities Ltd. say deflation and the lack of a stimulus such as last year's summer Olympics, which fueled sales of flat-panel televisions and DVD recorders, may limit retail sales growth.
``There's no big event this year that can act as a catalyst for consumer spending, so in year-on-year terms, we may see some negative numbers for some time still,'' said Adachi, senior economist at Deutsche Securities in Tokyo.
Sales at large-scale retailers, which are supermarkets and department stores, fell 2.1 percent at stores open at least a year, the 14th straight monthly decline. Sales at large retailers rose a seasonally adjusted 1.3 percent from March. Today's retail figures are not adjusted for changes in prices.
To contact the reporter on this story: Daisuke Takato in Tokyo at dtakato@bloomberg.net
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