Japan sales figures show healthy economy

Japan sales figures show healthy economy

JAPAN - With three months passed since the hike in the consumption tax rate in April, the drop in demand that followed the last-minute surge prior to the tax increase has eased, leading the government to make an upward revision to its economic assessment.

In the Monthly Economic Report for July released Thursday, the government upgraded its assessment for the first time in six months, backed by signs of recovery in sales of expensive goods such as automobiles and home electrical appliances.

Personal consumption rises

The government revised upward the assessment on the back of an uptick in personal consumption.

At a press conference Thursday, Akira Amari, state minister for economic and fiscal policy, said: "With the Japanese economy expected to recover into the future, wages will likely be improved. The economy is gradually overcoming the drop in demand [after the April tax hike]."

In department stores, summer sales kicked off late June. According to a public relations representative for Sogo & Seibu Co., high-quality items are selling well, including high-end women's wear and men's footwear.

Thanks to improvements in business performance, some companies will likely raise summer bonuses, set in line with each department store's expectations of more robust sales.

According to major appliance retailer Big Camera Inc., its sales in April dropped 10 per cent from a year earlier, but its May sales returned to the same level as last year.

Weak capital investment

In June, sales were down by 5 per cent on a year-on-year basis, but except for the sales of air conditioners, which were affected by the weather, sales rebounded from the drop in demand, a public relations employee said.

The drop in auto sales has also eased. New car sales in June surpassed the figure from the previous year for the first time in three months.

According to the Cabinet Office, there are signs that the fall in orders for new cars has abated, while sales of home electric appliances have started to pick up.

In contrast, the government downgraded its assessment on capital expenditures for the first time in 19 months, citing weak movement in shipments from production facilities.

The machinery orders data released in May by the Cabinet Office highlighted a drop across a variety of industries, including electric machinery and shipbuilding.

However, according to a survey by the Bank of Japan, major companies' capital expenditure plans for fiscal 2014 were higher than those of the previous fiscal year, setting the tone for expectations of further recovery going forward.

Amari expressed an optimistic view, saying: "The forecast for capital investment indicates positive signs. This latest weak movement is only be temporary and won't be prolonged. Prospects are positive."

Experts upbeat

Most market analysts say the drop in demand following the tax hike has eased, and the economy will return to a course for recovery

Mitsumaru Kumagai, a chief economist at Daiwa Institute of Research Holdings Ltd., said, "Compared to the previous consumption tax hike 17 years ago, private consumption is more resilient."

The seasonally adjusted unemployment rate stood at 3.5 per cent in May, its lowest level in 16 years and five months, raising some expectations for income growth.

However, the rising price of crude oil remains a concern. The Economy Watchers Survey for June quotes a concerned food manufacturer in the Hokuriku region who said the rising fuel cost was gradually increasing pressure on income.

Taro Saito of NLI Research Institute said, "Price increases have been a continuous trend, and if gasoline prices grow further, it chill down the economy."

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