* PM Abe's push to end deflation helps top-end goods sales
* Retailers raise forecasts on pickup in spending
* Many skeptical about limits of wealth effect
* Wages growth, labour market disparity still obstacles
By Stanley White and James Topham
TOKYO, April 11 Feeling bolder after a 50
percent jump in Tokyo share prices inflated his stock portfolio
in recent months, Akira Otomo surprised his wife with a new
kimono and matching traditional obi belt costing more than
After a decade and a half of self-imposed austerity, there
are signs that wealthier Japanese shoppers are spending more.
Confidence is rising, and with it sales of high-end goods and
clothes, giving retailers a boost.
"I'd given up on my stock portfolio, but I'm happy prices
are finally getting back to where they were before the Lehman
crisis," said Otomo, 56, who runs a human resources training
company. "I'm looking to sell, and I'm sure I'll spend some of
the profits," he added as he left an apparel shop in Tokyo's
upscale Omotesando district.
The trigger has been Japan's radical gamble to end deflation
under Prime Minister Shinzo Abe - a combination of aggressive
monetary easing, currency devaluation and promises of reform
Many retailers forecast higher profits for this year on
improved sales of luxury goods and clothing. But some retailers
and shoppers are unsure if spending will continue once the
feel-good factor of higher stock prices fades. For many
Japanese, wages remain depressed and employment prospects
"The rich have money, but I don't feel the economy's getting
better," said Eri Mori, a 42-year-old Osaka housewife. "I don't
see salaries rising."
The stock market rally that has given Otomo the
confidence to splurge was sparked by Abe's pledge to overhaul
the Bank of Japan so it would ease monetary policy more
aggressively. The BOJ delivered last week, agreeing to double
the amount of government debt it holds over the next two years.
Abe is counting on the wealth effect from further gains in
stock prices, encouraging investors to cash in and spend more.
"The sudden improvement in the stock market has led to a big
rise in sales at our department stores for luxury brands and
high-end goods like jewelry, precious metals and watches," said
Ryoichi Yamamoto, president of J.Front Retailing Co,
which operates store chains like Daimaru and Matsuzakaya that do
more business in Osaka and Nagoya.
The company sees that higher demand acting as a "tailwind"
to drive up operating profit by close to a third to a record 40
billion yen ($404 million) in the year to next February.
Besides high-end merchants, companies such as Uniqlo-owner
Fast Retailing Co, clothing maker Onward Holdings Co
and Sogo and Seibu department store owner Seven & I
Holdings Co have seen better sales of bright, colorful,
and patterned apparel this spring.
"The fact that products that can't be worn every day are
flying off the shelves seems to indicate that prospects for the
future are bright," Seven & I President Noritoshi Murata said as
the retailer forecast a third straight year of record profits.
Fast Retailing and general retailer Aeon Co report
their results later on Thursday.
FUTURE SEEN BRIGHTER
Japan's consumer confidence index hit its highest in more
than five years in February, and many analysts
see that as a sign that the economy is recovering from a slump
caused from the fallout of Europe's debt crisis and a
territorial spat last year with major trade partner China.
"I sell my own jewelry and, before, customers thought items
priced 3,000-4,000 yen ($30-$40) were expensive, but recently I
hear people saying that's cheap," said Makiko Tomitani, a
37-year-old freelance artisan in Osaka.
Looking for signs of a reviving economy, Japan's TV networks
have checked out the length of women's skirts, changes in
cosmetics use and even what alcohol people drink while admiring
the seasonal cherry blossoms.
Abe scored a public relations victory last month when
leading Japanese companies responded to his request to raise
wages by nudging up bonus payments.
But for many workers base salaries are unchanged - and
employers can easily cut bonuses in future. In addition, more
than a third of the country's workforce are contract employees,
who are paid less and don't have the benefits and security that
full-time staff have.
In another sign of the uneven gains, overtime pay - a
closely watched measure of corporate largesse - fell at the
fastest pace in over three years in February, and cash earnings
slid an annual 0.7 percent, reversing January's modest rise.
The BOJ has set a target of 2 percent inflation, but some
retailers say they still risk losing business if they raise
prices. The head of Nitori Holdings Co, a leading
furniture and home furnishings retailer that imports more than
80 percent of its cut-price products, said the company would not
increase its prices even as the yen weakens,
taking a hit to its margins rather than scare away shoppers.
And plans to raise a 5 percent sales tax to 8 percent in
April 2014 and then to 10 percent in October 2015 may also be at
the back of shoppers' minds, as economists say consumers may be
buying now only to pull back after the tax hike takes effect.
Japan has seen this type of volatility before.
In 1997, the government raised the sales tax from 3 percent,
a move many blame for pushing the country into recession.
($1 = 99.0050 Japanese yen)
(Additional reporting by Ritsuko Shimizu in Tokyo and Yoshiyuki
Osada in Osaka; Editing by Ian Geoghegan)