Posted on: Wednesday, November 28, 2001

Japanese retail sales fall for fourth month

Bloomberg News Service

TOKYO — Japanese retail sales fell for a fourth month in October as record-high unemployment sapped consumer spending and falling prices eroded sales.

Sales dropped 2 percent from September, seasonally adjusted, the Ministry of Economy, Trade and Industry said. From a year ago, sales fell 4.9 percent, more than the 3.5 percent drop economists expected.

Unemployment probably rose to a record 5.4 percent last month as the deepening recession forces companies such as Isuzu Motors Ltd. to eliminate thousands of jobs. That's prompting individual consumers to spend less while they fear they may be next to lose their jobs.

"What's disturbing about today's numbers is that it looks like the decline in employment and wages is beginning to take its toll," said Yasukazu Shimizu, economist at Aozora Bank Ltd.

The decline in consumer spending, which accounts for 55 percent of the world's second-biggest economy, is hurting business confidence. Small-business confidence fell for a 14th month this month as consumers and businesses slashed spending, an industry report showed yesterday.

Consumers are spending less as falling exports and a nine-month production slump force companies to shed thousands of workers. Isuzu, Japan's third-largest producer of trucks, said Monday it will slash 3,000 more jobs, on top of the 9,700 cuts it announced in May.

The October jobless report, to be released Friday, is expected to show the unemployment rate rose to 5.4 percent from 5.3 percent in September, according to the latest Bloomberg News survey.

"The deteriorating labor market is debilitating the consumer mindset," said Atsushi Nakajima, chief economist at the Industrial Bank of Japan.

Sales at supermarkets and department stores, which make up about 15 percent of total spending, declined 3.6 percent from September, today's report showed. From a year ago, sales fell 7.1 percent.

Retailers have to slash prices to lure cost-conscious shoppers, eroding sales revenue. Slack demand has led Japan's consumer prices to fall from year-earlier levels for two straight years.

Meanwhile, the international credit agency Fitch Ltd. cut Japan's debt rating this week, a move reflecting mounting skepticism about Prime Minister Junichiro Koizumi's ability to revive the moribund economy while reining in spending.

The move follows announcements in September from rival ratings agencies Moody's and Standard & Poor's, which placed their ratings of Japan's local debt on review for possible downgrade.

Fitch expects the Japanese government's debt to rise above 150 percent of the country's gross domestic product by the end of 2002.

The agency said that the global economic slowdown had dealt a double blow to Japan's efforts to lift itself out of a decade-long slump by undermining exports and technology-related investment. Japan already is struggling to overcome persistent deflation, its record unemployment, and a crushing burden of bad loans left over after property and stock prices collapsed at the beginning of the 1990s.