Retail sales in Japan declined to the lowest level in four years, as the uncertainty over jobs is hitting consumer confidence and compelling them to reduce expenses.
As per the statement given by the Trade Ministry, Japanese retail sales registered the highest decline in about four years in the last month of 2008, as reported by Bloomberg.
Japanese retail sales declined to 13.03 Trillion Yen ($144 Billion) in December 2008, down 2.7% from the same month a year ago. The plunge, preceded by 0.9% decline in November 2008, was the sharpest YOY fall since February 2005. The December decline crossed over the forecasted annual decline of 1.6%. In the same month, commercial sales tumbled down 11.3% to 51.324 Trillion Yen.
Retail sales were 1.5% down during Q4 2008 against the same period in 2007, reaching 35.117 Trillion Yen. In 2008, retail numbers rose slightly 0.3% to 135.473 Trillion Yen. On the other hand, wholesale sales witnessed 13.9% YOY decline in December 2008 and overall 8.8% decline in Q4 2008.
Weak consumer spending was the major factor that slashed Japanese retail sales. Due to contracting exports, companies laid off large number of employees and cut down their production. As a result, consumer confidence sank to a record low and the economy further pushed down into recession. The threat posed to jobs and wages led the Japanese households to cut down their spending and thus, affecting the retail sales.
Declining demand has been creating problems for all companies in Japan, whatever scale of business they are engaged in. They are reducing their workforce and decreasing output. Moreover, as the Japanese economy is constantly deteriorating and the same trend is likely to follow in near future, companies are alerting investors of horrible future perspectives of businesses.
The Bank of Japan is firmly determined to support the sinking economy by taking essential measures. The bank has already cut down the interest rates to 0.10% and agreed on purchasing commercial papers and government bonds in the fourth week of January 2009.
According to a Research Analyst at RNCOS, “Slow retail sales are clearly indicating to the deepening recession in Japan that adversely impacted consumer spending on food, clothing and appliances. Further, as the business conditions are expected to worsen in coming months, problems will definitely increase for the retail sector.”
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