Japan retail sales pick up in positive sign for spending

TOKYO (Reuters) - Japan’s retail sales climbed more than expected in June due to increased spending on fuel, appliances and cosmetics, in a positive sign that households are growing more confident in the economy.

FILE PHOTO: A woman in a Kimono makes her way at a shopping district in Tokyo, Japan March 7, 2018. REUTERS/Kim Kyung-Hoon/File Photo

The 1.8-percent annual increase in retail sales in June was more than the median estimate for a 1.6-percent annual gain and follows a 0.6-percent annual increase in May.The results for June showed retail sales have risen for eight consecutive months.

On a seasonally-adjusted basis, retail sales also gained 1.5 percent in June versus a 1.7-percent decline in the previous month, data from the trade ministry showed on Monday.

Japan’s economy is expected to bounce back in April-June from the first-quarter contraction that ended the longest growth run since the 1980s bubble economy.

However, the gain in retail sales is unlikely to provide much comfort for the Bank of Japan, which is struggling with low inflation and the side effects of its radical monetary easing program.

“Consumer spending is improving gradually, because the labor market is tight and people are getting their summer bonus payments,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“I’m still worried about spending because there are many part-time workers. Prices are not rising, so the BOJ will try to change its message about policy.”

The jobless rate is at a 25-year low of 2.2 percent, which many economists say should support consumer spending by putting upward pressure on wages.

There are risks that consumer sentiment could weaken if Japan becomes ensnared in a row with the United States over trade policy.

Washington is engaged in a heated dispute with China over its trade surplus, and there are worries U.S. President Donald Trump’s administration could ask Japan to take concrete steps to lower its trade surplus as well.

The BOJ is likely to lower its inflation forecasts at a meeting ending Tuesday and could tweak its massive stimulus program to make its monetary policy more sustainable.

Reporting by Stanley White; Editing by Joseph Radford and Sam Holmes