"Private consumption remained resilient, with some improvement observed in the employment and income situation. Meanwhile, signs of improvement in consumer sentiment had appeared again."
- BoJ minutes
Japan retail sales rose in October, posting the third consecutive monthly increase; however, the pace of growth was considerably slower than in September, indicating Japanese consumers have been slow to buy into Shinzo Abe's plan to revive growth via his set of stimulus measures, also known as Abenomics. It was supposed that ahead of the April's consumption tax hike, consumers will be showing willingness to increase spending; however, retail sales climbed just 2.3% on year in October, beating median forecast of 1.8%, whereas the pace decelerated from September's 3.0%. On a monthly basis, sales plunged 1.0%, after posting a 1.7% gain a month earlier.
Abe, who came into power in December, is relying on his three-arrowed strategy of higher fiscal spending, structural reforms and unprecedented monetary easing. Even though, these policies have to date contributed to economic growth and caused a surge in financial markets, the domestic demand is still lagging behind, with consumer being slow to change their spending habits. It is expected that after April the consumption will be even weaker, taking into account a 5% increase of sales tax hike. The government plans to put together another stimulus programme, to support the economy. Nonetheless, the latest Economy Watchers survey showed prospects are mixed and it is unclear whether another aid will help to avoid derailed economic growth.
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