Aug. 30 (Bloomberg) -- Japan's retail sales fell more than twice as much as economists expected, as a tax increase and a weekend typhoon kept shoppers away from the nation's department stores and car dealerships.
Sales declined 2.2 percent in July from a year earlier, the Trade Ministry said today in Tokyo, the biggest decline since June 2005. The median estimate of 25 economists surveyed by Bloomberg News was for a 0.8 percent decrease.
Stagnant wages and higher taxes may delay a recovery in spending and leave the economy dependent on sustained overseas demand. Though consumer spending is lackluster, economists attribute much of July's drop to a series of one-time events.
``All the bad factors seem to have fallen in July,'' said Azusa Kato, an economist at BNP Paribas in Tokyo. ``We don't expect consumption to keep deteriorating at this pace.''
The yen traded at 115.61 per dollar at 10:02 a.m. in Tokyo, from 115.72 before the report was published. The yield on Japan's 10-year bond rose 1.5 basis points to 1.595 percent.
Consumer sentiment sank to the lowest level since 2004 in July as gas prices rose to a 20-year high and the rollback of tax rebates a month earlier added to living costs. The government's loss of pension records may result in billions of yen in unpaid benefits, the Social Security Agency said in May.
There was one fewer Saturday in July compared with a year earlier and a typhoon washed out a three-day weekend.
Falling Shares
A 3.9 percent drop in the Topix stock index in July also damped consumer sentiment. Since then the index has declined a further 7.7 percent on concern subprime mortgage defaults will slow growth in the U.S., Japan's biggest export market. The market turmoil prompted the Bank of Japan to keep its overnight- lending rate at 0.5 percent last week.
Sales of clothing fell 9.7 percent in July from a year earlier, today's report showed. Automobile sales slumped 4.8 percent. Sales of fuel, meanwhile, increased 0.3 percent as gasoline prices surged.
Sales at large shops open for at least a year sank 3.8 percent, a backlash after rising at the fastest pace since 1998 in June, when department stores pushed forward the start of summer discounts.
Wholesale revenue rose 6 percent, the 24th consecutive monthly gain, led by cars and construction equipment for export. The divergence between wholesale and retail figures underscores the economy's reliance on demand from abroad.
Wages Slump
Wages have fallen for seven months running as younger workers replace retiring baby boomers, whose paychecks tend to be higher because of Japan's seniority-based compensation.
Those younger workers are showing a feeble appetite for spending. A survey last week of Japanese in their 20s by the Nikkei newspaper showed that more than a third of the country's young people dedicate their disposable income to savings. Only one in four young Tokyoites wants to buy a car, down from one in two in 2000, the survey showed.
The unemployment rate held at a nine-year low of 3.7 percent for a second month in July, a report due tomorrow at 8:30 a.m. will probably show, according to economists surveyed by Bloomberg News. The number of jobs has increased by 1.5 percent in the past 12 months, according to the central bank.
Today's retail report only accounts for spending in shops. It excludes Internet retailing and outlays on services provided by gyms, restaurants and movie theaters. Spending on travel, for example, rose at 10 times the pace of retail sales last year, according to the Japan Association of Travel Agents.
