Apr. 30, 2013, 16:30 JST

Abenomics pushed retail sales to one of the best growth in years


One of the best months for large retail stores

This past March was one of the best months for Japanese large scale retail stores. Their sales grew by 3.5% year on year (YoY), one of the highest growths since mid-1990s. On existing store comparison, the YoY growth was 2.4% YoY. 


All the regions in Japan seem to have enjoyed the high growth. Tohoku area led by 5.0% YoY, but Kyushu (4.9% YoY), Kansai (4.5% YoY) were not far behind. By the categories of retail stores, both department stores (3.4% YoY) and supermarket stores (3.5% YoY) did equally well. 

The result of the overall retail sales including other types such as automobile and drugs, was not as bright, down -0.3% YoY. However, the decline was largely due to the negative performance of automobile sales (-14.5% YoY) caused by the expiration of government subsidy on fuel efficient cars. In our view, the better performance of the large scale retail sales in March seems to represent the current mood in the Japanese retail sales.  

But wages still declining and corporate managers hesitant to invest

Is the high growth in the retail sales sustainable? Unfortunately, it is still hard to support such notion. With the wage still declining year on year, consumers are spending out of their saving. The labor market is improving, as confirmed by the decline in unemployment rate to 4.1% in March, but the improvement relies much on the demand for construction workers and it may not last when the fiscal stimulus is eventually withdrawn. 

Abenomics working on consumers, will it work on corporate managers?

Overall, the good news from the March retail sales is that "Abenomics" is indeed succeeding to stimulate the consumption activities. However, in order for us to judge that the growth is sustainable, we need to see evidences that Abenomics is also working to stimulate the corporate capital spending and the overall expansion of the demand can withstand the eventual withdrawal of fiscal stimulus. For the former, the most recent BoJ Tankan survey suggested that corporate sector was still cautious in its investment. For the latter, how the economy responds to consumption tax rate hike in April 2014 would be the ultimate judge.