According to METI, retail sales rose by 3.2% year on year(YoY) in April 2017. The growth rate is the highest since April 2015. A breakdown of retail sales shows that a broad range of sub-sectors contributed to the growth.
Vehicle sales was up by 6.0% YoY, apparel and accessories was also up by 6.0% YoY. By type of stores, super market sales was up by 1.3% YoY, a first positive growth in 5 months. Convenience store sales was up by 3.3% YoY, drug store sales up by 5.1% YoY. The strength of retail sales in April seems genuine and broad-based.
After a seasonal adjustment, retail sales in April was up by 1.4% month on month (MoM), the strongest growth in 6 months.
In a medium-term perspective, retail sales level in Japan has hardly grown since mid-2014. Stable and flat still seems an apt phrase to describe the state of retail sales in Japan. While the strength in the retail sales in April is encouraging, it will take a longer stretch up of similar strength to alter the long standing perception on retail sales in Japan.
Another reason to be skeptical on the strength of April retail sales is current stale wage growth in Japan. Despite the tight labor market condition, wages in Japan give little indication to rise. In March 2017, the wage growth was exactly at 0.0% YoY. Without an income to support the growth, private consumption cannot keep on growing beyond a one time bout.
In our view, consumers are unlikely to be the growth leader in Japan as they remain cautious, weighing the balance between the short-term stability in their job security and the longer-term uncertainty in their economic outlook.
Brief overview of Retail Sales:
“Retail sales” is published as a part of “Current survey of commerce”, a survey published monthly by the Ministry of Economy, Trade and Industry. It is a comprehensive survey on retail activities in Japan and it correlates well to the overall private consumption trend in Japan. According to the statistics, retail sales totaled in 137.6 trillion yen in Japan in 2012.
By type of retail stores, food and beverage accounts for 32.0% of the total, followed by motor vehicles (12.1%), fuels (9.8%) and general merchandise (9.2%). Comparative figures in the U.S. retail sales in 2012 were 14.5% for food and beverage, 20.3% for motor vehicles, 12.7% for gasoline station and 15.1% for general merchandise. Retail sales in Japan peaked in 1997 at 146.3 trillion yen before it started a sharp decline to 132.3 trillion yen in 2003.
It was a period of time when Japan faced the first nationwide financial crisis since WWII. Since 2003, retail sales seem to be on a moderate recovery path with a brief setback in 2010 amid the great global recession.
Sales of chain retail stores by type
Concise and Insightful Analysis on the Japanese Economy
