Japanese consumers lift spending

TOKYO -Japanese consumers reached deeper into their wallets in October, data showed Tuesday, spending more on everything from cosmetics to fuel as the quake-hit country's economic recovery ticks along.


Japan's retail sales in October rose for the first time in three months (AFP/File, Yoshikazu Tsuno)

Shop registers were busier as the nation's retail sales rose for the first time in three months, coupled with stronger-than-expected household spending.

The uptick was driven by a near 23 percent jump in auto sales on year, as pent up demand was unplugged after six months of falling sales in the wake of the March 11 quake-tsunami.

The figures come after Japan posted strong third-quarter economic growth, with its gross domestic product expanding at a 6.0 percent annualised rate as companies boosted production to make up for output losses following the quake.

"Domestic demand is slowly recovering, underpinned by a recovery trend in the jobless rate," UBS economist Takuji Aida told AFP.

Japan's retail sales rose 1.9 percent in October from a year earlier to about 11 trillion yen ($141 billion) while household spending, a key indicator of private consumption, edged down a lower-than-expected 0.4 percent, according to official data.

Credit Suisse said household "expenditures for clothing, healthcare, transportation and communication, and recreation were healthy," but added that it expected spending to dip again over the last quarter of the year.

"Since corporate bonuses were lower this winter than they were last year, we expect overall consumption to weaken over the year-end period," it said.

Consumer spending accounts for around two-thirds of Japan's economy.

Japanese exporters, who have seen shipments to key Western markets plunge, could see their fortunes turn around if the United States can keep its economy on track, helping debt-plagued Europe avoid a severe recession, Aida said.

"If the US economy stays solid, accompanied by proper monetary policy, the bottom would not fall out of the European economy," he said, adding that Japanese exports "will likely rebound in the middle of next year."


Chart showing the monthly unemployment rate in Japan, at worse-than-expected 4.5 percent in October (AFP Graphic)

On Monday, Bank of Japan governor Masaaki Shirakawa said Japan's economy has "recovered faster than expected", but he warned that Europe's public debt crisis and a strong yen would weigh on any lasting recovery.

"Japan's economy is likely to continue to face a severe situation for the time being, especially with respect to exports," Shirakawa said in a speech to business leaders.

"(However) the slightly more long-term perspective is that Japan's economy will eventually return to a sustainable growth path with price stability."

Set against the stronger spending trend, Japan's jobless rate rose to 4.5 percent in October from 4.1 percent in the previous month, data showed, but the rise was largely driven by more women looking for work and those who had stopped looking for a job restarting their search, Aida said.

The jobs picture will continue to be mixed despite quake rebuilding and budding optimism among small and medium-sized employers, observers said.

"The employment situation should remain sluggish overall amid an expected slowdown in exports and industrial production, while jobs in some sectors, like construction, should be supported by rebuilding activity after the quake," said Credit Suisse.

by Peter Brieger

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