Japan’s retail sector beat forecasts

Tokyo

Japan’s retail sales rose more than forecast in May, a sign that consumer spending will help sustain a rebound in the world’s third-largest economy.

Sales advanced 3.6 per cent from a year earlier the Trade Ministry said in Tokyo on Thursday. The median estimate of 13 economists surveyed by Bloomberg News was for a 2.9 per cent increase. From a month earlier, sales gained 0.7 per cent.

Rebuilding from last year’s earthquake and government incentives to bolster purchases of automobiles have boosted consumption. The government aims to sustain growth as Europe’s debt crisis and strength in the yen restrain exporters’ sales and profits.

“Consumption remains solid,” said Azusa Kato, an economist at BNP Paribas in Tokyo. Demand in quake-affected areas in the northeast have also been bolstering retail sales, she said.

The yen traded at 79.46 per dollar as of 10.29am in Tokyo and the Nikkei 225 Stock Average climbed 1.1 per cent after orders for US durable goods and contracts to buy existing homes rebounded in May. In April, retail sales rose 5.7 per cent from a year earlier.

Japan’s economy grew an annualised 4.7 per cent in the first quarter, with household outlays driving most of the expansion. Motor vehicle sales rose 66.3 per cent in May from a year earlier, according to a report released by the Japan Automobile Dealers Association on June 1. The government reintroduced a subsidy programme for certified low-emission vehicles in December, encouraging consumers to spend.

Slower growth

The risk is that the expansion will cool as the boost for these incentives fade, BNP’s Kato said. Economists surveyed by Bloomberg News predict gross domestic product growth will decelerate next year from this year’s pace as reconstruction demand wears off.

“Looking ahead, there will be few positive factors for Japan’s economy,” Kato said. “Japan’s economy probably won’t go into a recession or stall, but it’s unavoidable that the pace of expansion will slow.”

Seven & I Holdings Co, the owner of the 7-Eleven convenience-store brand, forecast profit will rise 19 per cent in the year ending February 2013 as it adds new stores in Japan and overseas, it said in a statement in April.

Shimamura Co, a Japanese apparel retailer, predicted in April that profit will rise 7.9 per cent in the 12 months through February 2013 as sales grow.