Improving retail store sales reflects optimism in Tokyo

Business Asia, July 5, 1999

Sales at Japan's large retail stores rose last month as shoppers bought more clothes, furniture and appliances at department stores, a government report shows.

Department and general merchandise store sales rose 0.5 per cent, seasonally adjusted, in May from April, the Ministry of International Trade and Industry said. That follows a 1.8 per cent increase in April.

The increase last month, the fourth in five months for large retailers, reflects growing confidence among consumers that the government's efforts to revive the economy are bearing fruit.

Retailers are "becoming less pessimistic about business," said Mr Akira Ito, head of the ministry's commercial and industrial statistics division. "The bad times seem to have settled down."

Still, there are few signs that a long slide in retail spending will turn around any time soon.

Sales fell 3.9 per cent in May from a year earlier to 1.9 trillion yen (US$15.7 billion) on a same-store basis -- the 13th annual decline in a row.

Japan's economy unexpectedly grew 1.9 per cent in the January to March period, spurred by government pump-priming and consumer spending.

For now, the economy's slide has halted, the central bank reckons, although there is no sign that companies and consumers can fuel recovery on their own.

Consumers are reluctant to spend much more as long as wages fall and unemployment rises, analysts said. Japan's jobless rate stayed at a record 4.8 per cent in April for the second straight month.

Large retailers' share of the shrinking 137 trillion yen retail market is growing as superstore operators such as Ito-Yokado, Daiei and Jusco open new outlets.

Large retailers held 16.9 per cent of the retail market in the 12 months ended March 31, up from 16.2 per cent the year before and 15.8 per cent the year before that.

Total retail sales fell 0.7 per cent from April, as falling sales at home electronics stores and gas stations offset a rise in sales at auto dealerships and clothing stores, the figures showed.

Consumer spending, which drives about 60 per cent of output in the economy, accounts for the bulk of retail sales. Declining profits at companies is leading to rising unemployment and falling wages. Economists say that will make it difficult for retail sales to sustain recent rises.