Japanese retail sales tumbled in August from a year earlier, posting their first annual decline in three months and adding to concerns that slowing demand at home and abroad may derail the economy's recovery from the March earthquake. Sluggish personal consumption, which accounts for roughly 60 percent of the world's No 3 economy, could be a source of concern for policymakers as they are set to burden households with tax hikes to fund reconstruction from the March disaster.
Retail sales have been rebounding in recent months from a plunge caused by the March earthquake and huge tsunami that triggered the world's worst nuclear crisis since Chernobyl in 1986 and tipped the economy into recession. Persistently weak domestic demand, along with the damage done to exporters by a strong yen and slowing global growth, cast some doubt on the prospects for a V-shaped recovery from the latter-half of this year.
"As the earthquake effect fades; falling prices, weak employment growth and steady declines in household income continue to weigh on spending intentions and consumer sentiment," said George Worthington, chief economist at Asia-Pacific IFR Markets in Sydney.