MNI ANALYSIS: Japan Retail Sales Losing Fuel, Food Price Prop

By Max Sato

     TOKYO (MNI) - The modest uptrend in Japanese retail sales has now clearly

shifted downward as the previously strong support from energy and food prices is

fading and solid spring clothing demand on mild weather failed to boost overall

sales in March.

     Fuel prices showed a slower year-on-year gain and fresh food prices eased

after surging late last year.

     Retail sales rose 1.0% on year in March, posting the fifth straight

year-on-year rise, but the pace of increase slowed from a recent peak of 3.6% in

December last year, the Ministry of Economy, Trade and Industry said Friday. The

severe winter weather and volatile financial markets led to slower gains in

January (+1.5%) and February (+1.7%) after stronger figures in most of 2017.

     On a seasonally adjusted basis, retail sales fell 0.7% in March, the first

drop in two months after +0.5% in February and -1.6% in January.

     --FLAT TO DOWNTREND

     "The seasonally adjusted three-month moving average fell 0.6% in March,

with declines seen in various categories. Retail sales have entered a flat to

downward trend," Kazuhiko Manaka, director of METI's Office of the Current

Survey for the Service Industry, told MNI

     METI downgraded its view on retail sales for the first time since January

2016, saying they were flat. Previously it said retail sales were "picking up

moderately."

     Manaka told MNI last month that the trend in retail sales was already

getting closer to being flat and the ministry might downgrade its assessment on

retail sales.

     --FADING PRICE SUPPORT

     "High prices of crude oil and food eased in mid-March and automobile sales

were down with the effect of new models fading," Manaka said.

     Retail sales have been largely supported by high prices of fuels and

vegetables. Excluding gasoline and heating oil, retail sales gained only 0.4% on

year in March (vs. +1.0% in overall retail sales) and 0.6% in February (vs.

+1.7%), according to METI's estimate.

     Industry data released last week showed department store sales were nearly

flat in March, up 0.1% on year. It was the first year-on-year rise in four

months, led by demand for spring clothing in light of mild temperatures.

     The Japan Department Stores Association noted that spending by tourists

from overseas continued to post double-digit percentage gains from a year before

and that sales to wealthy consumers remained solid.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

[TOPICS: MAJDS$,M$A$$$,M$J$$$,MT$$$$]