Japan Retail Sales Fall for 10th Month on Job Losses

By Toru Fujioka

July 29 (Bloomberg) -- Japan’s retail sales fell for a 10th month in June, extending the longest losing streak since 2003 as job losses and wage cuts forced households to trim spending.

Sales slid 3 percent from a year earlier, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg News predicted a 2.5 percent drop.

The retail slump indicates consumers, whose spending accounts for more than half of the economy, are unlikely to contribute to a recovery as employment prospects worsen. Economists expect a report tomorrow will show that while industrial production climbed for a fourth month in June, output will still be more than 20 percent lower than last year.

“The worst is over but that doesn’t completely wipe out households’ concerns,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. “Japan’s recovery will be weak until a pickup in jobs and wages boosts consumer spending.”

The Topix Retail Trade Index fell 0.3 percent at the lunch break in Tokyo. The broader Topix index was little changed. The yen traded at 94.49 per dollar as of 11:20 a.m. in Tokyo from 94.38 before the report was published.

Sales at large retailers tumbled 6.7 percent from a year earlier, the report showed. Department-store sales fell 8.8 percent in June, capping the worst half-year performance on record, the Japan Department Stores Association said last week. Sales at convenience stores declined for the first time in 14 months in June, according to the Japan Franchise Association.

Seibu, Sogo

Millennium Retailing Inc. said last week that its Seibu and Sogo department stores will launch a cheaper lineup of house-brand products in September to attract a wider range of customers.

“Consumers are becoming very sensitive about prices,” Nagatoshi Nii, spokesman at Millennium, said in a telephone interview this week. “We want to satisfy them.”

Sales of general goods led last month’s declines, falling 6.6 percent from a year earlier, the ministry said. Car sales slipped 0.5 percent, clothing and fabrics dropped 5.7 percent and fuel declined 5.5 percent.

From a month earlier, retail sales unexpectedly fell 0.3 percent, the first decline since March. Economists had expected stimulus measures to help sales climb 0.4 percent on a month- on-month basis.

The government has given at least 12,000 yen ($130) to each resident, subsidies for the purchase of fuel-efficient cars, and incentives for buying environment-friendly air conditioners, washing machines and televisions.

The worsening job market is likely to prompt people to cut back even more once the lift from the stimulus measures fades, Norinchukin’s Minami said. The unemployment rate rose to a six- year high of 5.3 percent in June and job openings slumped to the scarcest on record, economists predict reports will show on July 31.

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