Bloomberg News

Japan Consumer Spending Revives Even as Exports Slide: Economy

January 29, 2012

Jan. 27 (Bloomberg) -- Japan’s retail sales grew at the fastest pace in more than a year as a rebound in consumer spending propped up an economy reeling from the March earthquake and a deepening export slump.

Retail sales rose 2.5 percent in December from a year earlier, the Trade Ministry said in Tokyo today, the biggest advance since August 2010 and exceeding the 2.1 percent median forecast of 17 economists surveyed by Bloomberg News. From a month earlier, sales climbed 0.3 percent.

“Consumers are gradually regaining their appetite,” said Yoshimasa Maruyama, chief economist in Tokyo at Itochu Corp. “But we can’t rule out the possibility that declines in exports and production due to the global economic slowdown will weaken employment and incomes.”

Consumers are picking up some of the slack after export shipments slid the most since May because of a stronger yen and faltering global demand. Bank of Japan Governor Masaaki Shirakawa said this week consumer spending has been “unexpectedly robust,” citing the potential benefits of a strong yen, which makes imports cheaper, and increased demand in the aftermath of the March earthquake and tsunami.

The yen traded at 77.04 against the dollar as of 1:34 p.m. in Tokyo. The Nikkei 225 Stock Average fell 0.1 percent. Shares in Ryohin Keikaku Co., owner of the MUJI retail chain, rose 2 percent.

Property Prices

Elsewhere in Asia, a Chinese lawmaker said that property prices need to decline 30 percent to reach a “reasonable” level, equivalent to about six years’ salary for a family.

That “doesn’t mean prices will go down in every region, every city,” He Keng, a deputy director of the Financial and Economic Affairs Committee of the National People’s Congress, said in a transcript posted on the website of China National Radio. “The exact extent of the decline depends on demand.”

In Kuala Lumpur, Malaysian central bank Governor Zeti Akhtar Aziz told reporters that the nation’s interest rates are “accommodative” and inflation has peaked. Thailand reported that industrial output fell for a fourth month in December.

In Europe, Spain may report today retail sales fell 5.5 percent in December from a year earlier, while unemployment in the fourth quarter rose to 22.2 percent from 21.5 percent in the previous three months, according to Bloomberg surveys. Poland’s economy probably expanded 4.2 percent in 2011, after growing 3.8 percent the previous year, a separate survey showed ahead of the release by its statistics office.

U.S. Expansion

U.S. gross domestic product probably rose at a 3 percent annualized rate in the fourth quarter after advancing 1.8 percent in the previous three-month period, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department report today.

The Thomson Reuters/University of Michigan final index of consumer sentiment was probably 74, the same reading as the preliminary number, according to a Bloomberg survey before the report today.

Japan’s retail figures showed food and clothing were among items that led to higher retail sales last month, today’s report showed. Sales at Fast Retailing Co.’s Uniqlo brand stores surged 14.2 percent in December from a year earlier, the first increase since July.

A resurgence in household demand, which slumped in the aftermath of the quake as weaker confidence and electricity shortages kept people at home, has been a boon for retailers including Aeon Co. and convenience-store chain Lawson Inc., which both posted record operating profits in the nine months ended Nov. 30. Sales at convenience stores open at least a year rose 4.1 percent in December from a year earlier, according the Japan Franchise Association.

Holiday Season

Retailers got a boost from the first holiday season since the March temblor, the Japan Department Stores Association said in a report on Jan. 19. Department-store sales in the northeast region, the area most severely hit by the earthquake and tsunami, rose 5.8 percent last month, the industry group said.

“Last December was special as households were really in the mood to shop after what they went through in the aftermath of the disaster,” said Hiroyuki Fujiwara, a senior analyst at Nippon Research Institute in Tokyo, which specializes in consumer and corporate behavior and conducts research for the government. “The strong retail sales confirmed the momentum, but the question is how long this will last as we aren’t seeing any encouraging signs of a recovery to other areas of the economy.”

Record Deposits

Earthquake survivors in the northeast are tapping record growth in deposits that have swelled from insurance payouts and donations received in the aftermath of the disaster. Household deposits in the Tohoku area rose 8 percent in November from a year earlier, the biggest gain since comparable Bank of Japan data became available in 1999.

In a sign that exports are losing their status as a driver of growth in the world’s third-largest economy, a report this week showed Japan posted its first annual trade deficit since 1980. A yen near postwar highs against the dollar and factory disruptions from the March disaster curbed overseas shipments and higher energy demands bolstered imports.

Separate economic releases today showed core consumer prices, which exclude fresh food, slid 0.1 percent in December, the third consecutive decline. Bank of Japan board members last month expressed concern about how the yen’s appreciation and slower global demand would hurt exporters, a record of a December policy meeting released showed.

--With assistance from Eleanor Warnock, Minh Bui, Theresa Barraclough, Masahiro Hidaka and Toru Fujioka in Tokyo and Shamim Adam in Singapore. Editors: Lily Nonomiya, Paul Panckhurst

To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net; Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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