Japan Retail Sales Rise For 9 Straight Months Assisted By Tourism

Summary

• Nov retail sales +2.6% y/y vs forecast +3.7%
• Retail sales -1.1% m/m seasonally adjusted
• Nov jobless rate drops to 2.5%

Japanese retail sales grew for a ninth consecutive month in November, data showed on Tuesday, as the relaxing of COVID-19 border controls and the government’s domestic travel subsidy boosted consumer demand.

But from the previous month, sales declined from October, with price hikes in daily necessities hitting Japanese households as the nation’s core consumer inflation rate reached a fresh four-decade high, indicating price hikes were increasing.

A recovery in private consumption, which accounts for more than half of Japan’s economy, is essential to driving growth in the economy, which unexpectedly contracted in the third quarter.

Retail sales rose 2.6% compared to a year earlier but fell short of a median forecast of 3.7%. The pace of annual growth in sales, a barometer of private consumption, fell from 4.4% in October and 4.8% in the previous month.

On a seasonally adjusted basis, retail sales dropped 1.1% in November from October, slipping for the first time in five months.

Data showed last week that visitor arrivals to Japan rose to almost 1 million in November, the first full month after the country abolished COVID-19 curbs that effectively suspended tourism for more than two years.

A government domestic travel subsidy drive to help the pandemic-hit tourism industry, which began in mid-October, also enticed people to spend on travel and travel goods. Separate data revealed Japan’s unemployment rate dropped to 2.5% in November, in line with a forecast in a Reuters poll, and down from 2.6% in the previous month.

The jobs-to-applicants ratio, a key gauge of job availability, was at 1.35, unaltered from October and standing at the highest level since March 2020.

Bank of Japan Governor Haruhiko Kuroda on Monday aired expectations that intensifying labour shortages would prompt firms to increase wages, while he dismissed the probability of a near-term exit from ultra-loose monetary policy.

A higher inflation rate could also push firms to shift towards wage hikes. Canon Inc (7751.T) plans to increase its base salary for the first time in two decades, the Nikkei business daily reported on its website on Monday.

Japan’s economy unexpectedly contracted in the third quarter, as global recession risk, a weak yen, China’s faltering economy, and higher import costs weighed on consumers and businesses.

The government last week adjusted up its growth forecast for the next fiscal year to 1.5%, from a 1.1 % growth in the previous forecast from July.