Japanese shoppers stayed away in May, driving sales down sharply

Retail sales in Japan tumbled at a double-digit pace for the second-straight month in May as the coronavirus pandemic and lockdown measures delivered a heavy blow to consumer confidence and economic recovery prospects.

The sustained downturn in demand raises risks that the world’s third-largest economy could remain mired in recession longer than expected and a revival may be more sluggish.

Retail sales fell 12.3 percent in May from a year earlier, pulled down by a slump in spending on big-ticket items such as cars, as well as clothing and general merchandise, trade ministry data showed on Monday.

The decline followed a 13.9 percent drop in April, which was the biggest fall since March 1998, and was worse than an 11.6 percent fall forecast by economists in a Reuters poll.

Policymakers are hoping a rebound in private spending, which accounts for more than half of the economy, will help support growth as uncertainty about the global demand outlook threatens to delay a recovery.

Compared with a month earlier, retail sales in May saw their first rise in three months, increasing by a seasonally adjusted 2.1 percent following a 9.9 percent drop in April.

“Although consumption has picked up a little, there was a strong sense of caution towards the infection and customers were slow to come back,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

Revenge spending?

Some analysts said cash payouts of 100,000 yen ($933) per citizen in response to the pandemic could generate a bout of “revenge spending” following the lifting of a state of emergency in May and as more people get used to social distancing measures, which remain in place in crowded areas.

“Spending may bounce back more sharply in June as the economy fully reopens,” Marcel Thieliant, senior Japan economist at research firm Capital Economics, said in a research note sent to Al Jazeera.

“And we can’t rule out a stronger rebound in services consumption in May, which collapsed even more sharply than spending on goods during the pandemic. But the available data on restaurant bookings and long-distance travel suggest that the services sector continues to struggle,” he added.

Midori, a 29-year-old worker at an electric instrument maker who declined to give her last name, said only one of her friends had received the government payout so far.

“I think consumption will decline compared to before the coronavirus outbreak,” she told the Reuters News Agency on Saturday while going shopping in Yokohama, adding that she plans to invest part of the cash handout and spend the rest on daily life essentials.

Shinkin’s Tsunoda worries that a weakening economy and “strong sense of uncertainty about the future” could lead to cuts in year-end bonus payouts and employment adjustments by firms.

The economy is forecast to contract by more than 20 percent on an annualised basis this quarter, marking the third-straight quarter of decline, with business activity hit by lockdown measures from April through late May.