Thomson Reuters – January 28, 2016 – Japan’s retail sales fell more than expected in December, data showed on Thursday, suggesting that sluggish household spending will keep fourth-quarter economic growth subdued.
While many analysts expect the Bank of Japan to hold off on additional monetary easing at its two-day rate review ending on Friday, the weak data will likely keep policymakers under pressure to do more to reflate a fragile economic recovery.
Retail sales fell 1.1 percent in December from a year earlier to mark the second straight month of declines, more than a median market forecast for a 0.1 percent decline, trade ministry data showed on Thursday.
“The recovery in consumption is weak despite (improving) income conditions. It seems households are tightening their purse strings due to rising food costs,” said Junichi Makino, chief economist at SMBC Nikko Securities.
“Consumption may slow sharply in October-December from the 0.7 percent quarterly rise in July-September,” he said.
Japan’s economy has emerged from recession but growth remains subdued as sluggish emerging market demand and slow wage growth weigh on exports and private consumption.
Policymakers hope that the windfall from falling energy prices will nudge households to boost spending, though some analysts warn that the economy may have suffered a contraction in October-December on weak household spending.
The global market rout has also heightened pressure on the BOJ to expand monetary stimulus, though many central bankers prefer to stand pat this week as they cling to the view Japan’s economy continues to recover moderately.
The retail sales data foreshadow a run of indicators due on Friday, including inflation and household spending.
(Additional reporting by Izumi Nakagawa; Editing by Chang-Ran Kim and Eric Meijer)