Wainwright Marks Management - Japanese Consumption Too Weak to Fuel Growth

Japan's retail sales increased for the ninth consecutive month last month and exceeded predictions by analysts at Wainwright Marks Management who believe that private consumption is helping to keep Japan's economy afloat.

But Wainwright Marks Management analysts say that the pace of growth cooled significantly on a monthly basis which could be an indication that consumption may not be robust enough to sufficiently fuel economic growth in the third quarter.

Last month's 1.5 percent yearly increase in retail sales beat the 1.2 percent forecast by Wainwright Marks Management economists and followed a 1.7 percent increase from the month before.

Official data revealed that seasonally-adjusted retail sales increased by only 0.1 percent in July and this gain was well below the 1.4 percent increase in June this year.

Wainwright Marks Management analysts say that Japan's private consumption caused the third quarter to begin on a low note but that the foundation for an upswing in spending remains intact with employment and wage growth steadily on the rise.

Consumer spending is increasing slowly but steadily as businesses increase salaries to cope with labor shortages due to Japan's elderly population.

Wainwright Marks Management analysts say that a sufficient increase in private consumption, which accounts for around 60 percent of Japan's economic activity, could bolster consumer prices, which would in turn give the Bank of Japan a good reason to up the rate of inflation to the desired 2 percent target.

In July Japan's central bank admitted that inflation could stay below the targeted 2 percent for another 2 years.