Retail sales in Japan dropped for the third month straight in February, with households limiting expenses amid the ongoing pandemic. Key retail prices in the country have fallen rapidly following business restrictions, prompting business analysts to predict a 0.2% decline in sales.
Fortunately, Japan's consumer costs increased by0.2% year on year in June, following a 0.1% fall the previous month. This was the first increase in consumer prices since August of last year, as consumption recovered following an increase in COVID-19 vaccinations. Main upward pressure came mainly from fuel, housing, and water charges, furniture and household utensils, recreation, and even education. Food prices also went up for the first time in nearly eight months.
What Business Analysts are Saying
Economists predicted that the Japanese economy would decline highly during the first quarter of the year. Consumers in the country were not spending as they used to, meaning exports dropped fast. Atsushi Takeda, Itochu Economic Research Institute's chief economist, stated, “that the coronavirus isn’t subsiding is a major reason to worry about a delay of an economic recovery. Clothes aren’t selling because people aren’t going out. People are not really returning to commercial facilities; the trend is for them to go shopping at supermarkets in their neighborhoods.”
Business analysts also predicted that the Bank of Japan will not be able to meet its target of stable 2% price growth. If COVID-19 cases continue to increase, the government will likely impose more restrictions, with rising commodity prices and expectations of accelerating inflation playing significant roles in this prediction.
Crucial Insights
According to Nobuyasu Atago, Okasan Securities Co.’s chief economist, "the government wants to limit the movement of the people during the coming 'golden week' holidays, and that's going to hurt businesses during what's normally a busy period. Vaccination delays will also push back the economy's recovery.”
While the Bank of Japan forecasted back in April that inflation would fall short of the 2% target during its governor's term, which runs until early 2023, Governor Haruhiko Kuroda believes that the target and efforts have rescued Japan's economy from deflation, meaning it was not a mistaken policy.
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