Japan retail sales boosted by government stimulus

Consumers are being targeted by government stimulus measures

Japanese retail sales jumped sharply in February as government stimulus measures encouraged consumers to spend, official figures have shown.

Sales rose by 4.2% from a year earlier, much more than analysts had expected.

The rise happened despite falling prices in Japan, which usually encourage consumers to spend less and wait until prices fall further.

Analysts said the rise was unsustainable given the deflationary pressures in Japan.

“Given the stagnant income situation, this sizeable rise in retail sales is too good to be true,” said Seiji Shirashi at HSBC Securities in Tokyo.

“Some government stimulus measures will continue until April and others will last until September. After these incentives expire, there should be a big negative rebound in retail sales”.

Long struggle

Figures released week showed that consumer prices fell by 1.2% in February compared with a year earlier – the 12th month in a row that prices have fallen.

Also last week, Japan’s central bank increased the amount of money available to banks through short-term loans to try to halt the fall in prices.

Analysts say that despite government and central bank measures to tackle deflation, Japan could be set for a long period of price falls.

Japan has a history of struggling with deflation. The 1990s are often referred to as Japan’s “lost decade” because of the struggle against falling prices.