Japan Retail Sales Slump Flashes Warning Signal for Kuroda

27-Apr (Bloomberg) — Japan’s retail sales fell in March the most since 1998, cutting against central bank chief Haruhiko Kuroda’s view that cheaper energy will give a boost to the world’s third-biggest economy.

Sales dropped 9.7 percent from a year earlier, when there was a run-up in purchases ahead of an April sales-tax increase, according to trade ministry data released Tuesday. Sales sank 1.9 percent from the previous month, compared with a gain of 0.6 percent forecast by economists in a Bloomberg survey.

The weak reading on consumer spending comes ahead of this week’s Bank of Japan policy decision and economic outlook that could highlight waning momentum in inflation. Kuroda has said cheaper oil may crimp price gains in the near term, while eventually fueling growth and inflationary pressures.

“It’s becoming clear that Japan’s recovery is very sluggish,” said Kiichi Murashima, an economist at Citigroup Inc. “With a tight labor market and better consumer sentiment, we don’t have to change the view that spending will pick up gradually. But uncertainties are growing about the strength of the economy and that’s worrisome for the BOJ.”

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PG View: This terrible news came out a couple days ago, and what a huge miss versus expectations! It just goes to show that even market professionals continue to think that massive money printing will eventually ignite consumption. Apparently not yet, so what’s the BoJ to do? Print more is the likely answer.