Retail sales unexpectedly declined in December, indicating weakness in consumer spending as the central bank began a two-day meeting Thursday to decide whether to boost monetary stimulus.
The drop adds to concerns that price gains in Japan will remain insufficient to spur economic growth, with data due Friday that is forecast to show inflation barely above zero. Turmoil in global financial markets and the yen’s recent strength add to pressure on the Bank of Japan to consider a policy adjustment to spur price increases.
Sales fell 0.2 percent from a month earlier, better than the 2.5 percent slump in November but still short of forecasts for an increase of 1 percent. From a year earlier, sales dropped 1.1 percent in December.
Mild weather in December hurt sales of winter clothes, fuel and other seasonal products, according to Azusa Kato, an economist at BNP Paribas SA in Tokyo. There are prospects for an improvement in consumer spending when these seasonal factors pass, she said.
Figures for employment, household spending and industrial production will also be released Friday before the BOJ decision is announced around midday. While the job market is expected to remain tight, economists project household spending and industrial production to drop.
“A fall in sentiment is probably responsible for the gap between income and consumption, and the main factor there is the rise in prices for food and everyday items,” SMBC Nikko economists led by Junichi Makino wrote in a note. “The portion of income that is consumed by food purchases has jumped, and households seem to be cutting back to deal with the increased food cost burden.”
Of the 42 economists surveyed by Bloomberg, only six expect the central bank to boost stimulus on Friday. Twenty-three see a move likely between March and July and 13 say there is no prospect of a boost in the foreseeable future.