Business / Economy

May retail sales fell sharply in Japan as emergency declaration stunted demand


Retail sales tumbled at a double-digit pace for a second consecutive month in May as the coronavirus pandemic and emergency stay-at-home measures delivered a heavy blow to consumer confidence.

The sustained downturn in demand raises risks that the world’s third-largest economy could remain mired in recession longer than expected and that a recovery may be more sluggish.

Retail sales fell 12.3 percent in May from a year earlier, pulled down by a slump in spending on big ticket items such as cars as well as clothing and general merchandise, trade ministry data showed on Monday.

The decline followed a 13.9 percent drop in April, which was the biggest fall since March 1998, and was worse than a 11.6 percent fall forecast by economists in a Reuters poll.

Policymakers are hoping a rebound in private spending, which accounts for more than half of the economy, will help support growth as uncertainty over the global demand outlook threatens to delay a recovery.

Compared with a month ago, retail sales in May rose for the first time in three months, increasing a seasonally adjusted 2.1 percent following the 9.9 percent drop in April.

“Although consumption has picked up a little, there was a strong sense of caution towards the infection and customers were slow to come back,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

Some analysts say cash payouts of ¥100,000 per person in response to the pandemic could fuel a bout of “revenge spending” following the lifting of the state of emergency in May and as more people get used to social distancing measures, which remain in place in crowded areas.

Midori, a 29-year-old worker at an electric instrument maker who declined to give her last name, said only one of her friends has received the government payout so far.

“I think consumption will decline compared to before the coronavirus outbreak,” she said on Saturday while going shopping in Yokohama, adding that she plans to invest part of the cash handout and spend the rest on daily life essentials.

Shinkin’s Tsunoda worries that a weakening economy and “strong sense of uncertainty about the future” could lead to cuts in year-end bonus payouts and employment adjustments by firms.

The economy is forecast to contract by more than 20 percent on an annualized basis this quarter, marking the third straight quarter of decline, with business activity hit by lockdown measures from April through late May.

Some analysts fear uncertainty about the economic outlook following the virus outbreak and a nationwide tax hike in October last year could make consumers save more and spend less, with more people working from home.

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