(Updates with currency in fifth paragraph.)Aug. 30 (Bloomberg) — Japan’s retail sales fell more than economists forecast in July as a winding down of government subsidies for car purchases threatens to further damp consumer spending in coming months.
The 0.8 per cent decline from a year earlier was the first drop in eight months and compared with the median estimate of a 0.1 per cent fall in a Bloomberg News survey of 13 economists. From a month earlier, sales slid 1.5 per cent, according to data released by the trade ministry in Tokyo today.
Weakness in consumer spending and declining exports may make it harder for the government to prevent the economic contraction forecast for this quarter by Bank of America Merrill Lynch and Credit Suisse Group AG. Most of 274.7 billion yen ($3.5 billion) of subsidies for purchases of fuel-efficient cars is spent, with RBS Securities Japan Ltd. saying the program may run out of money next month.
“We can expect a plunge in spending in the fourth quarter because of the end of eco-car subsidies,” Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official, said before today’s report.
The yen traded at 78.72 per dollar as of 9:07 a.m. in Tokyo, little changed from before the release.
Smaller summer bonuses for workers this year may have contributed to the sales decline. Payouts by large companies, often equivalent to several months’ pay, fell 2.5 per cent after rising in the previous two years, according to the Japan Business Federation, also known as Nippon Keidanren.
The Cabinet Office downgraded its assessment of the domestic economy for the first time in 10 months on Aug. 28 after shipments to the European Union fell 25 per cent in July from a year earlier. Private consumption accounts for about 60 per cent of Japan’s gross domestic product.
The Japanese economy, the world’s third-biggest, will grow 1 per cent this quarter on an annualized basis after a 1.4 per cent expansion in the previous three months, according to the median estimate of analysts surveyed by Bloomberg News. A minority of analysts forecast a contraction.
Japan passenger vehicle sales will drop as much as one- fifth in the next quarter from a year earlier, after growing about 53 per cent in the first seven months, according to analysts at BNP Paribas and IHS Automotive. Only about 10 per cent of the money allocated for car subsidies rolled out from April remained unspent as of Aug. 27, according to the trade ministry.
Carmakers such as Nissan Motor Co. are calling for additional stimulus as they lose state aid of as much as 100,000 yen per vehicle.
–Editors: Paul Panckhurst, James Mayger
To contact the reporters on this story: Andy Sharp in Tokyo at [email protected]; Keiko Ujikane in Tokyo at [email protected]
To contact the editor responsible for this story: Paul Panckhurst at [email protected]