Japan retail sales up, slowdown likely ahead

Japan's retail sales rose in June from a year earlier for the sixth straight month due to government stimulus steps, but analysts warned gains are likely to slow later this year as the effects of such measures are expected to taper off.

Retail sales have been rising since the start of this year, supported by government subsidies for purchases of cars, electronics and other durable goods, but the incentive scheme for autos is set to expire in September and the purchase programme for electronics will end in December.

The Democratic Party-led government is trying to balance fiscal discipline with the need to spend to protect the economic recovery as it compiles the budget for the fiscal year starting next April.

The government has put a cap on policy-related spending but it could come under pressure to roll back some of its policies to keep the spending cap, meaning there would be little leeway to stimulate the household sector if the outlook worsens."The positive effect from stimulus is becoming more subdued," said Yasuo Yamamoto, a senior economist at Mizuho Research Institute in Tokyo.

"There could be some front-loading of car purchases before those subsidies expire in September, so third-quarter consumption could be somewhat strong.

Courtesy Reuter