- Yasunari Ueno, chief market economist at Mizuho Securities Co.
Retail sales in the world's third biggest economy declined sharply for the third time this year in June, adding to sign consumer spending remains weak to be a key driver of economic growth. Sales fell 0.8% in the reported month from May, following drops in January and March. However, measured on an annual basis, retail sales rose 0.9% in June, overshooting expectations for a 0.5% increase. The data challenge Prime Minister Shinzo Abe to convince companies to continue to increase wages to help consumers cope with an increase in living costs that the Bank of Japan sees rising quickly this year.
Japan's economy emerged from last year's recession as a weak Yen boosted manufacturers' profits, prompting them to gradually spend increase wages and investment. However, exports and household spending have failed to build enough momentum, leading many analysts to expect flat or slightly negative economic growth for the April-June quarter. The Cabinet Office will publish the second-quarter gross domestic product figures on August 17. The Bank of Japan expects a tightening job market will lead to more wage gains and prop up consumption, though some policymakers remained concerned that rising food and grocery costs could dent spending.
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