Japan's retail sales climb

Consumer spending accounts for 60 percent of the Japanese economy

By Staff and wire reports

TOKYO, Japan -- Japanese retail sales rose 1.2 percent in January, breaking a string of 45 months of declines.

Sales hit ¥10.595 trillion this January, or $91.5 billion. That's up from ¥10.466 trillion in January 2000, according to a report released Monday by the Ministry of Economy, Trade and Industry.

Economists were surprised by the jump. They had been expecting a decline due to bad weather.

But a spokesman from the ministry said cold weather in fact boosted sales. For instance, Japanese consumers spent 17.6 percent more on fuel over January 2000, partly thanks to higher crude oil prices.

A positive sign, but no turnaround

Consumer spending accounts for 60 percent of the Japanese economy. Experts often point to weak consumer spending as both a symptom and a cause of Japan's decade-long economic woes.

Marshall Gittler, Japan economist for Bank of America, said the sales increase was a positive sign. But he cautioned against reading too much into the numbers.

"I wouldn't call it a turnaround on one set of figures," he said. He characterized the Japanese economy as "looking up from flat on its back."

Car sales were also strong, up 11.7 percent. The government attributed that to Japanese consumers replacing cars they bought before a rise in the consumption tax in April 1997.

In fact, Japanese retail sales had fallen every month since the hike in the consumption tax.

Economists said the retail sales growth could be a statistical quirk.

January sales are hard to adjust, seasonally, because of the New Year's holiday. This year, Japanese consumers had an extra two days off work over 2000, which may have contributed to greater spending, Gittler said.

Gittler also noted that sales in large-scale retail stores fell 2.4 percent, when seasonally adjusted. That excludes newly opened or closed stores.

"I don't want to throw too much cold water on it," Gittler said. "Certainly it's good news after such a long series of negative figures, to have a break. But nobody is going to call the end of such a tenacious trend based on one month's figures."

Consumer spending has stagnated because companies have held down wages, to boost profits and their return on capital.

Weak consumption has been compounded by problems with Japanese exports and with capital spending. Last week, Japan posted its first trade deficit in four years.

James Malcolm with J.P. Morgan said he was skeptical of the retail sales numbers. He said he would wait for the survey of household spending, due on Friday, for confirmation of the increase.

Reuters contributed to this report.

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