Japan's retail sales dip in April

Analysts said a bad month wouldn't cloud the brighter economic outlook

Japanese retail sales fell during April as poor weather and a decline in the stock market put people off shopping.

The Ministry of Economy, Trade and Industry said sales dropped by 0.6%, and were 2.4% lower than a year ago.

Higher fuel costs, which pushed fuel sales up 8.1%, probably was another factor hitting demand, analysts said.

The decline in retail sales was bigger than expected and surprised many analysts as Japan's economy and its job market has been steadily improving.

Slowly recovering

However, the analysts said that sales should pick up again in coming months and would be strong enough to prompt higher interest rates.

"Retail sales were a bit weaker than expected, probably because clothing did not sell as well as we had thought due to bad weather at weekends in April," said Mamoru Yamazaki of HSBC Securities Japan.

"Given favourable job and income conditions, I think consumption will likely recover," he explained. "Retail sales may be somewhat weak at the moment, but won't fall as a trend."

These figures were not exactly brilliant Seiji Adachi, Deutsche Securities

Japan, the world's second-biggest economy, has endured years of stagnating prices that have eroded the value of wages and depressed growth.

Recent figures have shown that inflation is returning, and the Bank of Japan is expected to raise borrowing costs over the summer months to keep price growth in check as the economy continues to expand.

Earlier this month, the Bank of Japan reported that the country's economy grew by an annualised rate of 1.9% during the first three months of this year - nearly double what observers had expected.

Analysts said that no recovery was ever flawless and despite April's dip in retail sales growth remained on track and conditions were improving.

"These figures were not exactly brilliant," said Seiji Adachi of Deutsche Securities.

But "the environment surrounding consumption, such as employment, has been improving for some time and raising hopes of a further pickup in spending", he continued.