Retail sales have resumed their slump and consumer prices in Tokyo slipped the most in a decade in November, government data showed, amid falling energy costs and record virus cases that kept buyers home and clouded the outlook for a recovery.
Seasonally adjusted retail sales fell 2% from the previous month as consumers continued to cut back on clothing purchases, the Economy Ministry reported on Friday.
Analysts had forecast a decline of 0.8%. The government has maintained its assessment that sales are essentially flat.
A separate report showed that consumer prices in Tokyo excluding fresh products fell 0.9% more than expected, the highest level since 2010, suggesting a deeper decline in domestic price trends closely watched by the Bank of Japan. The BOJ called last week to review its policies to make them more sustainable, as the pandemic will likely require stimulus measures to be sustained longer.
Other data on Friday showed a relative bright spot for the country’s economy, with both the unemployment rate and a key measure of labor market strain improving.
Employment figures are positive for households, but sharp cuts in bonuses at the nation’s largest companies this winter should trigger more caution in spending. Friday’s data may just be the first indications of further weakness in consumer spending, a key driver of Japan’s rebound from its pandemic crisis.
The trend is likely to worsen as the virus has spread rapidly since the second half of November, with new confirmed cases nationwide surpassing 3,000 in the past two days.
“Given the spread of the virus at this level, the government must put aside its thoughts of recovery for now,” said economist Atsushi Takeda of the Itochu Research Institute. “It’s no good until we can get back to a situation where people can consume without fear.”
Record virus cases this month have forced Prime Minister Yoshihide Suga to suspend a travel incentive program over the New Year’s holidays, and local leaders are even calling on the elderly to wear masks at home.
These moves, along with heightened anxiety, will hit restaurants, hotels and stores during a key spending season.
Most analysts see growth slowing this quarter to a fraction of the summer’s pace, and some are now signaling a risk that the economy will contract again in early 2021.
A 73.6 trillion yen stimulus package announced this month by Suga may help, but much of the new spending is directed towards longer-term goals of making the economy greener and digital after the pandemic.
Retail sales rose 0.7% from a year earlier as consumers adjusted to a sales tax hike. Economists had projected an increase of 1.8%.
Another report showed that the unemployment rate in Japan improved, falling to 2.9% in November. The job-candidate ratio fell to 1.06, improving for a second month. The ratio means that there were more job postings than 106 to 100 applicants.
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