Japan retail sales rise faster than expected as COVID curbs eased

Japan May retail sales increase faster than expected as COVID curbs are eased. A man walks in front of an electronics store in Tokyo.

Japan's retail sales increased for a third month in May, reinforcing the belief that strong consumption will lead to an economic rebound this quarter, although rising inflation poses a risk to household spending for the rest of 2022, according to TOKYO Reuters.

Retail sales rose by 3.6% in May from a year earlier, government data showed on Wednesday, slightly higher than the median market forecast for a 3.3% gain.

It was the third month of advancement since March when the government lifted all coronavirus restrictions on face-to- face services nationwide, following an upwardly revised 3.1% increase in April.

Retail sales increased by 0.6% on a seasonally adjusted month-on-month basis, after a 1.0% growth in April.

Japanese consumers dined out and took domestic trips during the Golden Week holiday season towards early May, enjoying the break without COVID- 19 curbs for the first time since 2019.

The reversal of service consumption and broader household spending likely boosted the world's third-largest economy, with analysts expecting an annualised 4.1% growth in Japan's gross domestic product this quarter, after a 0.5% contraction in January-March.

The rising cost of living due to higher commodity prices and the yen's decline to 24 year-lows has stoked fears that Japan's consumption-led recovery could be undermined throughout the rest of the year.

Consumer inflation has taken centre stage heading into the national upper house election next month, hitting Prime Minister Fumio Kishida's approval ratings, although his ruling party is still widely expected to claim victory.