Japan's retail sales fall for seventh straight month hurt by coronavirus

An employee of a retail store wearing a protective face mask and a face mask is seen outside of the store under a nationwide state of emergency as the spread of the coronavirus disease (COVID-19) continues in Tokyo, Japan May 10, 2020. REUTERS/Issei Kato/Files

TOKYO (Reuters) - Japanese retail sales fell for the seventh straight month in September as the coronavirus pandemic kept a lid on consumers’ shopping appetite, underscoring the fragile economic recovery from this year’s slump.

As the harm from the health crisis remains deep, Japanese Prime Minister Yoshihide Suga will announce next week a plan for fresh stimulus to help the recession-stricken economy, sources have told Reuters.

Retail sales fell 8.7% in September from a year earlier, government data showed on Thursday, a bigger fall than a median market forecast for a 7.7% drop.

“Consumer spending remains weak. We expect it will stagger in coming months before its gradual pick up,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “External demand will likely recover faster, led by China’s economic growth rather than domestic demand, which is forecast to stay subdued.”

Spending on items such as cars, consumer appliances and clothing declined last month, causing a big fall in the retail sales, the data showed.

Analysts also said the year-on-year decline was exacerbated as people rushed to buy ahead of a sales tax hike in October last year.

Compared with the previous month, retail sales slipped 0.1 % on a seasonally adjusted basis, reversing from a 4.6% gain in August.

The world’s third-largest economy is recovering from the worst postwar contraction in April-June, though any rebound is expected modest with growth taking some time to return to pre-COVID-19 levels.

The signs are that lacklustre consumer spending and weak capital spending would offset a bounce in exports and factory output, putting policymakers under presser to adopt more steps to help shore up the economy.

Reporting by Yoshifumi Takemoto, writing by Kaori Kaneko; Editing by Chang-Ran Kim, Shri Navaratnam and Gerry Doyle