Sales and Prices Improve in Japan

Progress is fitful, but both retail sales and consumer prices in Japan are showing signs of stabilization after their protracted declines.

In August, retail sales rebounded by 2.8% from a similar-sized drop in July. After a steep drop from March to April, sales seem to be finding some footing, despite some wide monthly swings. Participation by various groups of stores is uneven, however, making it difficult to judge the staying power of overall demand. Sales at clothing stores, for instance, fell in August. But they have been relatively stable all of this year, breaking a distinct downtrend that has lasted generally throughout the history of these data back to 1992.

Consumer prices suffered marked declines during 2001, as seen in both the accompanying table and graph. But some improvement is evident more recently. The whole index has hovered in a narrow range of 98.0 to 98.3 (2000 = 100) since August of 2002, ending a marked downtrend that had begun in late 1998. Furniture prices, for example, are still declining, but the rate of decline has slowed from nearly 4% in mid-2002 to 2.5% in the last couple of months.

Perhaps it is grasping at straws to use the word "improvement" for sales and price levels that are still going down. But the shifts in both trends away from accelerating contractions that might have resulted in some self-reinforcing downward spiral is still quite encouraging for Japanese stores and their customers.