Japan Retail Sales Drop for Seventh Month on Job Woes

By Toru Fujioka

April 28 (Bloomberg) -- Japan’s retail sales fell for a seventh month in March as worsening job prospects and declining wages prompted households to cut spending.

Sales slid 3.9 percent from a year earlier after decreasing 5.7 percent in February, the steepest pace since February 2002, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg predicted a 4.7 percent drop.

The world’s second-largest economy will shrink 3.3 percent this fiscal year, the sharpest contraction in the postwar period, the government forecast yesterday. Finance Minister Kaoru Yosano said the economy remains in a “crisis” as a slump in exports and factory output take a toll on employment.

“The labor market is deteriorating, profits have plunged; everything points to consumer retrenchment,” said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. in Tokyo.

The Nikkei 225 Stock Average opened lower, before gaining 0.6 percent at 9:57 a.m. in Tokyo. The yen traded at 96.55 per dollar from 96.38 before the report.

The Trade Ministry cut its assessment of retail sales, saying for the first time that they are “decreasing” compared with “on a decreasing trend” a month earlier.

Sales of clothing, general goods and automobiles led the declines, the ministry said. Fuel sales also slumped after gasoline prices dropped from a year ago.

Large Retailers

Receipts at large retailers including department stores and supermarkets tumbled 8.1 percent, matching the steepest decline in 11 years set in February.

Aeon Co., Japan’s largest supermarket chain, posted its first annual loss in seven years. Takashimaya Co., the country’s third-largest department store operator, said this month that it expects net income to decline 36 percent in the current fiscal year.

“Conditions will remain very severe for the next year at least,” Koji Suzuki, president of Takashimaya, said April 15.

Adachi at JPMorgan said retailers may get a boost this month as households start spending 2 trillion yen in handouts as part of a stimulus plan unveiled by Prime Minister Taro Aso last October.

“From April we expect an improvement because of the cash benefits, but we still don’t know how much it will help,” Adachi said. He said only about a quarter of the 12,000 yen most people are eligible for will be spent on items they wouldn’t otherwise buy.

Aso has pledged to spend 25 trillion yen in three stimulus packages since he took office in September to reduce the effect on households and businesses of a collapse in exports.

Jobless Rate

The jobless rate rose to a three-year high of 4.4 percent in February. Household spending fell for a 12th month and wages dropped 2.7 percent, matching the fastest pace in five years.

Toyota Motor Corp., the world’s largest automaker, last week said it will cut summer bonuses of managers in Japan by 60 percent in anticipation of its first loss in almost six decades.

From a month earlier, retail sales dropped 1.1 percent in March, the sixth straight decline, the Trade Ministry said.

“Households will remain cautious about spending as the job market worsens and incomes decline,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The outlook for consumer spending is grim.”

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net