- Mizuho Research Institute
Japan's retail sales climbed slightly for the first time in four months in February, but the overall picture for consumption remains weak. Retail sales increased 0.5% last month from a year earlier, according to the Ministry of Economy, Trade and Industry. The rise followed a 0.2% decrease in January. Measured on a monthly basis, retail sales declined 2.3%. The propensity to consume, a measure of households' willingness to spend rather than save, increased 3.9 points in February, the biggest rise in nine months.
Japanese consumers have spent cautiously in recent months. Last quarter consumer spending was the biggest drag on Japan's economic growth, prompting the world's third biggest economy to shrank 0.3% over the quarter. Domestic consumption has mostly struggled since the government raised the sales tax in 2014. However, policy makers hope that if prices start to increase at a decent pace, consumers will be encouraged to spend, rather than put off purchases hoping that prices will decline. Yet, the Bank of Japan's efforts have been undermined by recent appreciation of the Japanese Yen, which is lowering import prices, thereby making it harder for inflation to reach the 2% target. In addition to that, weaker wages is also making it harder for the central bank to reach the price target, as workers have less disposable income to spend.
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