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Last Updated: Wednesday, 28 July, 2004, 05:58 GMT 06:58 UK
Japan retail sales slide in June
A pedestrian crossing in Tokyo's Ginza shopping district
The hard part is getting consumers into shops and spending money
Japanese retail sales fell in June as bad weather and fewer shopping days kept many consumers at home.

The Ministry of Economy, Trade and Industry said that sales fell 2.9% from a year earlier and slid 0.6% from May.

The decline was more than analysts had forecast and has raised a question mark over whether better economic conditions are filtering down to consumers.

Personal consumption is a key component of the world's second-largest economy and vital to any lasting recovery.

The concern for many observers is that wages and employment seem to be lagging even though exports and growth forecasts have jumped ahead.

Kiichi Murashima, an analyst at Nikko Citigroup, explained that Wednesday's figures show "the recent upturn in spending was led by sentiment and a decline in savings, rather than a genuine improvement in wages".

Bright spot?

The government remained optimistic about the prospects for growth, however, adding that "there is no need to make a large change in our assessment".

Analysts also were upbeat, adding that the record hot weather in July should help push up spending.

According to Yoshimasa Maruyama, a senior economist at Mizuho Research Institute, "there is no need to be pessimistic".

"Due to very hot weather in July, we hear sales of beer and air conditioners have been very strong."

Last week, Japan almost doubled its economic growth forecast for the 12 months to March 2005. The new target is 3.5%, compared with the previous forecast of 1.8%.

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