Japan Economy

Japan’s retail sales fall in October as car sales drop

PUBLISHED : Thursday, 29 November, 2012, 11:39am
UPDATED : Thursday, 29 November, 2012, 12:56pm

Japan’s retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions, adding pressure on the government to stimulate an economy that may be entering a recession.

Sales fell 1.2 per cent from a year earlier, the Trade Ministry said in Tokyo on Thursday, after a 0.4 per cent advance in September. The median estimate of 10 economists surveyed by Bloomberg News was for a 0.8 per cent decline. From a month earlier, sales increased 0.7 per cent.

Weakening consumer demand is dragging on growth in the world’s third-largest economy before December 16 elections. Candidates from the two largest political parties have said they will implement additional spending to rekindle expansion after exports fell for a fifth month in October and wages stagnated.

“Japan’s consumption has been losing steam since September, when the government terminated subsidies for energy-efficient car purchases,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Weakening overseas demand has hurt employment and wages, discouraging spending,” she said.

Japanese stocks rose, with the Nikkei 225 Stock Average poised to rebound from Thursday’s loss after Goldman Sachs said shares will benefit from policy changes if the opposition wins next month’s election. The gauge was up 0.7 per cent at the 11:30am end of morning trading in Tokyo. The yen was little changed at 82.10 per dollar after touching a seven-month low of 82.84 last week.

The government has said it will announce a second round of stimulus tomorrow, tapping about 1 trillion yen (US$12.2 billion) in reserve funds. The plan would follow about 750 billion yen of stimulus announced last month.

Opposition leader Shinzo Abe on Thursday called for unlimited monetary easing and public spending to create inflation expectations, which would drive down the yen, boost stock prices and eventually lead to increased consumption and rising exports.

A poll published in the Nikkei newspaper on Thursday found Abe’s Liberal Democratic Party may get a plurality at the election, with 23 per cent of respondents planning to vote for the LDP, 10 per centage points higher than the support for Prime Minister Yoshihiko Noda’s Democratic Party of Japan.

The Nikkei survey was carried out by telephone between November 26-28 and gained 865 valid responses. The paper didn’t give a margin of error.

The LDP’s election policy platform called for an inflation target of 2 per cent. In an interview this week, Yoichi Takahashi, an economic adviser to Abe, said the government should set a price goal and hold the Bank of Japan’s governor accountable if the target is missed.

Elsewhere in the Asia-Pacific region, signs of recovery are mixed. South Korean manufacturers’ confidence fell to the lowest level in more than three years as gains in the won threaten to slow a rebound in exports, a report showed on Thursday. Hong Kong’s October retail sales growth probably slowed, according to a Bloomberg News survey.

Australian sales of newly built homes rose for the first time in four months in October while business investment slowed less than economists forecast last quarter as stronger mining spending outweighed a manufacturing decline, reports released on Thursday showed.

The US economy probably grew at an annual pace of 2.8 per cent in the third quarter, more than an initial reading of 2 per cent, according to the median estimate in a Bloomberg survey before a government release on Thursday. Initial jobless claims probably fell to 390,000 in the week ended November 24, a separate survey showed.

In Europe, a final reading of November consumer confidence in the region will probably remain unchanged from an initial estimate which showed it declining to the lowest in three and a half years, according to a Bloomberg News survey. UK mortgage approvals rose more than economists forecast in October.

In Japan, sales of motor vehicles fell 3.5 per cent in October from a year earlier, the biggest decline since August 2011, according to the retail report. A government program subsidizing purchases of fuel-efficient vehicles ended in late September.

Retail sales by machinery and equipment businesses dropped 5.8 per cent in October from a year ago as purchases of flat- panel televisions fell. Sony and Panasonic Corp. the Japanese electronics makers reeling from record losses, had their credit ratings cut to junk by Fitch Ratings last week amid slumping demand for their televisions.

Japan’s economy may fall into a recession in the three months ending December, based on the definition of a recession as two consecutive quarters of contraction. Gross domestic product will decline 0.4 per cent in the period, according to a Bloomberg survey of economists, after shrinking 3.5 per cent in the previous three months.

Japanese recessions are officially defined by a government- charged panel that considers data beyond figures for gross domestic product.

Japanese wages dropped for seven of the 12 months through September. Large companies cut winter bonuses by 2.7 per cent from last year to 781,396 yen, a business lobby group said earlier this month.

“A slump in exports has been hurting jobs and wages, reducing overtime work and winter bonuses,” said BNP’s Kato. “These factors will discourage consumer spending in coming months.”