According to recent data released on Tuesday, retail sales in Japan continued their upward trend for the ninth consecutive month in November. This can be attributed to the easing of COVID-19 border controls and the government’s domestic travel subsidy, both of which have stimulated consumer demand.
Although sales increased compared to the previous year, there was a slight decline from the previous month due to price hikes in daily necessities. This has put a strain on Japanese households, especially considering that the nation’s core consumer inflation rate reached a 40-year high. This suggests that price increases are becoming more widespread and impacting consumer spending.
Given that private consumption accounts for over half of Japan’s GDP, a recovery in consumer spending is crucial for driving economic growth, particularly after the unexpected contraction the country faced in the third quarter.
In November, retail sales saw a growth rate of 2.6% compared to the same period last year, falling short of the median forecast of 3.7%. The annual growth rate in sales, which serves as an indicator of private consumption, also slowed down, with October recording a growth rate of 4.4% and September at 4.8%.
On a seasonally adjusted basis, retail sales declined by 1.1% in November compared to the previous month. This marks the first decline in five months and raises concerns about the sustainability of the upward trend in consumer spending.
However, recent data revealed a significant increase in visitor arrivals to Japan in November, reaching nearly 1 million. This surge in tourism follows the lifting of COVID-19 restrictions that had severely impacted the tourism industry for over two years. Additionally, the government’s domestic travel subsidy campaign, initiated in October, has incentivized people to spend on travel and related products.
Overall, while Japan’s retail sales have shown consistent growth in recent months, the decline in November’s sales from the previous month raises concerns. The impact of rising prices on household budgets is becoming evident, highlighting the need for measures to alleviate the burden on consumers. Furthermore, the sustainability of the recovery in tourism and its contribution to retail sales growth will play a crucial role in driving Japan’s economic recovery.
Useful links:
1. Reuters – Japan retail sales rise for ninth straight month in November
2. Japan Today – Japan’s Nov retail sales up for 9th month
