Japan’s retail sales extend slump
Coronavirus curbs keep shoppers away
TOKYO: Retail sales in Japan tumbled at a doubledigit pace for the second straight month in May as the coronavirus pandemic and lockdown measures delivered a heavy blow to consumer confidence and economic recovery prospects. The sustained downturn in demand raises risks that the world’s thirdlargest economy could remain mired in recession longer than expected and a revival may be more sluggish. Retail sales fell 12.3 percent in May from a year earlier, pulled down by a slump in spending on big ticket items such as cars as well as clothing and general merchandise, trade ministry data showed yesterday.
The decline followed a 13.9 percent drop in April, which was the biggest fall since March 1998, and was worse than a 11.6 percent fall forecast by economists in a Reuters poll. Policymakers are hoping a rebound in private spending, which accounts for more than half of the economy, will help support growth as uncertainty over the global demand outlook threatens to delay a recovery.
Compared to a month earlier, retail sales in May saw their first rise in three months, increasing a seasonally adjusted 2.1 percent following a 9.9 percent drop in April. “Although consumption has picked up a little, there was a strong sense of caution towards the infection and customers were slow to come back,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.
Some analysts say cash payouts of 100,000 yen ($933) per citizen in response to the pandemic could fuel a bout of “revenge spending” following the lifting of a state of emergency in May and as more people get used to social distancing measures, which remain in place in crowded areas. Midori, a 29-year-old worker at an electric instrument maker who declined to give her last name, said only one of her friends has received the government payout so far.
“I think consumption will decline compared to before the coronavirus outbreak,” she said on Saturday while going shopping in Yokohama, adding that she plans to invest part of the cash handout and spend the rest on daily life essentials. Shinkin’s Tsunoda worries that a weakening economy and “strong sense of uncertainty about the future” could lead to cuts in year-end bonus payouts and employment adjustments by firms.
The economy is forecast to contract by more than 20 percent on an annualized basis this quarter, marking the third straight quarter of decline, with business activity hit by lockdown measures from April through late May.
Nikkei falls 2%
Meanwhile, Tokyo’s benchmark Nikkei index lost more than two percent yesterday following a rout on
US markets as fears grow over a resurgence of coronavirus infections.
The Nikkei 225 dropped 2.30 percent, or 517.04 points, to end at 21,995.04 — its first close below the 22,000 level since June 15th. The broader Topix index fell 1.78 percent, or 28.15 points, to 1,549.22. “The Nikkei index fell following sharp losses on US shares over fears of the spread of new coronavirus infections,” Yoshihiro Ito, chief strategist at Okasan Online Securities, said in a commentary.
In Tokyo trading, SoftBank Group dropped 2.76 percent to 5,380 yen after it announced estimates it will gain 600 billion yen ($5.6 billion) from the initial sale of T-mobile shares. Last week, the investment giant said it will sell the US firm shares worth over $21 billion as it sheds assets to shore up its financial health.
Uniqlo casual wear operator Fast Retailing fell 2.35 percent to 60,640 yen while Sony shed 2.73 percent to 7,313 yen. Nissan tumbled 3.40 percent to 394.7 yen and Toyota 1.58 percent to 6,759 yen.
The dollar fetched 107.13 yen in Asian trade, against 107.22 yen in New York. – Agencies