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Japan’s Retail Sales Fall in October as Car Sales Drop: Economy

Published: November 29, 2012 | 7:18 am
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Japan’s retail sales fell in October by the most in 11 months as consumers purchased fewer cars and televisions, adding pressure on the government to stimulate an economy that may be entering a recession.
Sales fell 1.2 percent from a year earlier, the Trade Ministry said in Tokyo today, after a 0.4 percent advance in September. The median estimate of 10 economists surveyed by Bloomberg News was for a 0.8 percent decline. From a month earlier, sales increased 0.7 percent.

Weakening consumer demand is dragging on growth in the world’s third-largest economy before Dec. 16 elections. Candidates from the two largest political parties have said they will implement additional spending to rekindle expansion after exports fell for a fifth month in October and wages stagnated.
“Japan’s consumption has been losing steam since September, when the government terminated subsidies for energy- efficient car purchases,” said Azusa Kato, an economist at BNP Paribas SA in Tokyo. “Weakening overseas demand has hurt employment and wages, discouraging spending,” she said.
Japanese stocks rose, with the Nikkei 225 Stock Average poised to rebound from yesterday’s loss after Goldman Sachs Group Inc. said shares will benefit from policy changes if the opposition wins next month’s election. The gauge ended the day up 1 percent at the 3:00 p.m. close in Tokyo. The yen fell 0.1 percent to 82.16 per dollar after touching a seven-month low of 82.84 last week.

Fiscal Stimulus

The government has said it will announce a second round of stimulus tomorrow, tapping about 1 trillion yen ($12.2 billion) in reserve funds. The plan would follow about 750 billion yen of stimulus announced last month.
Opposition leader Shinzo Abe today called for unlimited monetary easing and public spending to create inflation expectations, which would drive down the yen, boost stock prices and eventually lead to increased consumption and rising exports. A poll published in the Nikkei newspaper today found Abe’s Liberal Democratic Party may get a plurality at the election, with 23 percent of respondents planning to vote for the LDP, 10 percentage points higher than the support for Prime Minister Yoshihiko Noda’s Democratic Party of Japan.
The Nikkei survey was carried out by telephone between Nov. 26-28 and gained 865 valid responses. The paper didn’t give a margin of error.
Calls from politicians for action by the Bank of Japan reflect the grim economic situation, central bank policy board member Sayuri Shirai said to reporters today after a speech in southwestern Japan. Japan’s economic problems will be the same whoever wins the election, she said.

Inflation Target

The LDP’s election policy platform called for an inflation target of 2 percent. In an interview this week, Yoichi Takahashi, an economic adviser to Abe, said the government should set a price goal and hold the Bank of Japan (8301)’s governor accountable if the target is missed.
Elsewhere in the Asia-Pacific region, signs of recovery are mixed. South Korean manufacturers’ confidence fell to the lowest level in more than three years as gains in the won threaten to slow a rebound in exports, a report showed today. Hong Kong’s October retail sales growth probably slowed, according to a Bloomberg News survey.
Australian sales of newly built homes rose for the first time in four months in October while business investment slowed less than economists forecast last quarter as stronger mining spending outweighed a manufacturing decline, reports released today showed.

U.S. Growth

The U.S. economy probably grew at an annual pace of 2.8 percent in the third quarter, more than an initial reading of 2 percent, according to the median estimate in a Bloomberg survey before a government release today. Initial jobless claims probably fell to 390,000 in the week ended Nov. 24, a separate survey showed.
In Europe, a final reading of November consumer confidence in the region will probably remain unchanged from an initial estimate which showed it declining to the lowest in 3 1/2 years, according to a Bloomberg News survey. U.K. mortgage approvals rose more than economists forecast in October.
In Japan, sales of motor vehicles fell 3.5 percent in October from a year earlier, the biggest decline since August 2011, according to the retail report. A government program subsidizing purchases of fuel-efficient vehicles ended in late September.

Cars, TVs

Retail sales by machinery and equipment businesses dropped 5.8 percent in October from a year ago as purchases of flat- panel televisions fell. Sony Corp. (6758) and Panasonic Corp. (6752) the Japanese electronics makers reeling from record losses, had their credit ratings cut to junk by Fitch Ratings last week amid slumping demand for their televisions.
Japan’s economy may fall into a recession in the three months ending December, based on the definition of a recession as two consecutive quarters of contraction. Gross domestic product will decline 0.4 percent in the period, according to a Bloomberg survey of economists, after shrinking 3.5 percent in the previous three months.
Japanese recessions are officially defined by a government- charged panel that considers data beyond figures for GDP.
Japanese wages dropped for seven of the 12 months through September. Large companies cut winter bonuses by 2.7 percent from last year to 781,396 yen, a business lobby group said earlier this month.
“A slump in exports has been hurting jobs and wages, reducing overtime work and winter bonuses,” said BNP’s Kato. “These factors will discourage consumer spending in coming months.”


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