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No surprises there: Japan’s retail spending down in December

January 29, 2007
By Ken Worsley


Japan’s Ministry of Trade, Economy and Industry announced this morning that revenue at Japan’s retailers declined 0.2% from November to December of 2006. Year-on-year, sales declined 0.3% from December of 2005.

These numbers are hardly encouraging, for the Bank of Japan or anyone else. Many observers continue discussing whether or not the BOJ will decide to raise interest rates at their next meeting in February, but it’s starting to look like a moot point. The economy needs to recover before such a thing happens.

So, then, why the decline in retail sales? Shinji Kikuchi, head of research at the Japan Department Store Association, puts it well:

Consumers don’t have buying power. Winter bonuses rose close to 3 percent, but disposable income hasn’t increased. Rising pension premiums and taxes have gobbled up the gains.

Rising taxes? You might have missed that one, but the government rolled back income tax cuts on New Year’s Day (for the second year in a row) - when there wasn’t much news and everyone was distracted. That decision slipped under the radar in terms of news coverage, but still hits the wallet, which is what counts in the long run, as well as the month-to-month run.

Given the second effective tax rate hike made at the beginning of this month, as well as the continued warm weather, it’s hard to see department store sales picking up in January. It’s too early for a projection, but if we were forced to make one: down 0.3% against last January. Let’s hope we’re wrong, and for the right reasons.

By the way, the Japan Department Stores Association 2006-2007 guide is now available as an English pdf.

Filed Under Department Stores, Retail 

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Comments

One Response to “No surprises there: Japan’s retail spending down in December”

  1. Greg on January 30th, 2007 1:33 pm

    You have to admit, if the government’s going to do something like roll back tax cuts, it has to be done on a day like New Year’s, to reduce the bad feelings over it. People don’t really understand what the government is doing and would just react in a visceral manner.

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