"Consumer spending has been stagnant and the trend is likely to continue for a while due to sluggish growth in wages".
-Hidenobu Tokuda, Mizuho Research Institute
Japan's retail sales declined in May for the sixth time in seven months, underscoring policymakers' continued challenge of stimulating growth and reinforcing Prime Minister Shinzo Abe's decision to delay a sales tax increase far into the future. Retail sales fell 1.9% in May from a year earlier, more than a median market forecast for a 1.6% declines, data from the Ministry of Economy, Trade and Industry showed. Retail sales, which are considered an important proxy for consumer spending and inflation, have been in steep decline for most of 2016. While Japan avoided recession in the first quarter, the economy slipped back into deflation in March and April.
Moreover, the report hints at a dwindling economy amid weakness in private consumption, exacerbating the risks for an economy that is struggling with a slowdown in exports and business investment. Sentiment among consumers and companies may weaken after Britain's vote last week to leave the European Union roiled global financial markets, strengthening the yen and pushing down stocks. A slump in sales of mini-cars in the wake of the fuel-economy test controversy also weighed somewhat on retail sales. Sales of mini-cars continued to be sluggish, though sales of other passenger cars were firm partly because of new models.
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