September 29, 2011 / 1:20 AM / 8 years ago

UPDATE 1-Japan retail sales slide amid murky econ outlook

 (Adds analyst quotes, detail, background)	
 * Aug retail sales -2.6 pct yr/yr vs f'cast -0.6 pct
 * Sales down as rebound from March quake loses steam
 * Yen rise, global slowdown threaten post-quake recovery
 By Tetsushi Kajimoto	
 TOKYO, Sept 29 (Reuters) - 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.	
 "The weakness in retail activity looks set to extend into
2012 with fiscal and monetary policies doing little to promote a
return to broader economic growth."	
 The 2.6 percent drop in retail sales was far bigger than a
forecast from economists for a 0.6 percent annual fall and
followed a revised 0.6 percent gain in July, the trade ministry
said.	
 On the month, seasonally-adjusted retail sales fell 1.7
percent in August, down for the second month in a row.	
 A slump in sectors including automobiles and electronics
dragged down overall retail sales in August.	
 Retail sales had been driven in the last few months by
factors such as household demand for energy-efficient goods to
cope with electricity shortages and the switch to digital
broadcasting helping solid television sales.	
 Japan's top retailer Seven & I Holdings posted a
robust first quarter as lingering aftershocks, rolling blackouts
and radiation fears in the weeks following the disaster in March
saw consumers stock up on basic supplies such as bottled water
and toilet paper. 	
 Economists say Japan's economy is likely to resume growing
in the third quarter after three consecutive quarters of
contraction, boosted by a rapid recovery in supply chains, but
the outlook is increasingly murky as a strong yen and Europe's
sovereign debt crisis erode exports.	
 The government and ruling Democratic Party agreed this week
to draft another extra budget for this fiscal year worth 12
trillion yen ($157 billion), and to raise taxes worth 9.2
trillion yen over a decade to fund disaster reconstruction.
 	
 ($1 = 76.425 Japanese Yen)	
	
 (Reporting by Tetsushi Kajimoto; Editing by Joseph Radford)	
 	
 
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