Japan retail sales fall at record pace after consumption tax increase

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 in April declined 13.7 per cent from the previous month, the trade ministry said, more than the median forecast of an 11.7 per cent decline in a survey of 11 economists.

The drop-off follows a consumer splurge before the April 1 tax increase, and highlights the task Prime Minister Shinzo Abe faces in steering the nation through a forecast contraction this quarter. The focus now is whether the economy will rebound enough for the government to further raise the levy as planned.

"Consumption will likely bounce back after a fall-off in demand, but the pace will probably be slow," said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co in Tokyo. "The government will probably push through the second tax increase, though it may add fiscal stimulus to cushion any slowdown."

Sales in April fell 4.4 per cent from a year earlier, with drops in all sectors including cars, clothing, food and beverages. Vehicle deliveries last month fell to the lowest since December 2012, with sales at Toyota Motor and Mazda Motor the lowest since 2011, according to the latest industry figures.

The economy is forecast to shrink an annualised 3.4 per cent this quarter after 5.9 per cent growth in the first three months of the year.