–METI Keeps View After Recent Upgrade: Retail Sales Picking Up
–Department Store Sales on Recovery Track but Still Below Pre-Pandemic Levels
–Demand for Cosmetics, Drugs Remains Strong; Auto Sales Picking Up
By Max Sato
(MaceNews) – Japanese retail sales posted their eighth straight year-on-year increase in October, led by wide-ranging price hikes, but lower Covid cases and the government’s new program to support tourism also helped department stores sales recover further and improving supply led to a pickup in auto sales, data released Tuesday by the Ministry of Economy, Trade and Industry showed.
The seventh wave of the pandemic had eased by early September after the number of new Covid cases hit record highs from late July to late August. There are signs of an eighth wave in Japan but that didn’t seem to stop people from stepping out or traveling in October.
The sharp depreciation of the yen is adding to already high import costs but the Bank of Japan would not tighten monetary policy just to shore up the yen’s value. Governor Haruhiko Kuroda has repeatedly said the bank would not consider raising interest rates while inflation is not accompanied by solid wage growth and supply continues to exceed demand in the Japanese economy. The BOJ board has projected inflation is unlikely to be anchored around its 2 percent target at least for the next few years.
The key points from the METI’s Current Survey of Commerce:
* Retail sales continued posting solid gains in October, up a preliminary 4.3% on the year, after increases of 4.8% (revised up from 4.5%) in September, 4.1% in August and 2.4% in July. The increase was lower than the median economist forecast of a 5.0% rise. Sales fell 0.9% in February, when the Omicron variant caused a spike in Covid cases. The government eased public health restrictions in late March and has continued reopening the economy.
* Sales of automobiles rose 10.6% in October after rising 10.2% in September, which was the first year-on-year rise in 13 months, and falling 6.3% in August and posting double-digit percentage drops earlier.
* General merchandise sales at department stores and supermarkets marked the eighth straight year-on-year gain, up 6.6% in October following increases of 8.8% in September and 10.1% in August. Sales of apparel and accessories rose 4.8% after dipping 2.3% in September for the first fall in three months and rising 7.8% in August.
* Sales of fuels rose 1.9% on the year in October, with the pace of increase decelerating from 7.5% in September, 10.8% in August and a recent peak of 28.9% in November 2021. The government has been trying to cap retail gasoline price markups by providing subsidies to refineries.
* Demand for medicine and cosmetics remained strong, up 10.5% on the year in October for the 18th straight increase, after rising 12.4% in September. Sales of machinery and equipment (largely consumer electronics) dipped 1.2%, after a 3.0% gain in September, which was the first rise in three months as a result of easing supply constraints.
* On the month, retail sales rose just 0.2% on a seasonally adjusted basis in October but marked the fourth straight rise after a 1.5% rise (revised up from 1.1%) in September and following gains of 1.3% in August and 0.7% in July and a 1.3% drop in June. The increase was below the median forecast of a 0.8% gain (forecasts ranged from 0.3% to 1.5% increases). Many suppliers of food and beverages among other items jacked up prices on Oct. 1 at the start of the second half of fiscal 2022 to reflect elevated producer and import costs, which is eroding the purchasing power of many households.
* The ministry maintained its assessment, saying retail sales are “picking up.” Last month, it upgraded its view from the previous statement that sales were “picking up gradually.”
* Industry data released last week showed department store sales marked the eighth straight year-over-year rise in October, up 11.4%, after rising 20.2% in September, 26.1% in August, 9.6% in July and 11.7% in June and 57.8% in May. Sales were up 13.1% from pre-pandemic October 2019, but that is largely because the sales tax rate was raised to the current 10% from 8% that month. Compared to October 2018, last month’s sales were still down 6.6%, although some stores posted gains from four years ago.
* The Japan Department Stores Association reported increased mobility amid easing Covid cases and the government’s new fiscal program to support domestic traveling propped up overall sales. Demand for luxury brands and artworks remained strong while lower temperatures led to higher sales of autumn and winter clothing, it said. Eased border restrictions and the weak yen continued to boost spending by foreign visitors, up 335.2% on the year, but they remained below pre-pandemic levels, down 46.6% from October 2019, although the association noted that the pace of decline slowed from 63.7% in September.