Japan retail sales are mostly lower across the board.

Special factors have hit the Japanese consumer to be sure. There was a radiation leak at a nuclear plant that turned out to be worse that was first reported. And then a power shortage hit. Bad weather has interrupted the consumer. But through it all wages have remained stagnant and the consumer’s fundamentals have also failed to improve. So the sharp drop in consumer spending is not simply something to dismiss as due to some of these rogue factors that have haunted the consumer. The consumer may be feeling real pressure. In addition Japan is closely linked to the US economy and next month it will be interesting to see if Japanese moods and spending patterns are affected by the financial turbulence we have seen. With such weak spending it is hard to see why the BOJ would still be considering a rate hike.