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Japan retail sales down for 16th month in December

January 28, 2010 | The associated

TOKYO (AP) -- Japanese retail sales declined for the 16th straight month in December, as consumers in the world's second-biggest economy stayed cautious amid falling wages and a lackluster job market.

Sales retreated 0.3 percent from a year earlier, following a 1.1 percent fall in November, the government said Thursday.

The results illustrate Japan's predicament. The country emerged from its worst recession since World War II last year, helped by growing demand from robust Asian economies. But its prospects are threatened by deflation, a resurgent yen and persistently weak domestic demand.

On Wednesday, the government said that exports grew for the first time in 15 months in December on robust Asian demand. Exports jumped 12.1 percent from a year earlier to 5.4 trillion yen ($60 billion).

Asia-bound exports, which account for more than 50 percent of Japan's total shipments, surged 31.2 percent to 3.0 trillion yen, according to the ministry. Japan's exports to China soared 42.8 percent to 1.1 trillion yen on brisk sales of cars, plastics and organic chemicals.

"Asia is driving this improvement," said Goldman Sachs economist Chiwoong Lee. Goods of all types -- from machinery to electronics -- are benefiting, he said.

The Bank of Japan this week cited Asia's rapid growth in narrowing its forecast for economic contraction this year. It now projects gross domestic product to fall 2.5 percent this fiscal year through March, better than its previous prediction of a 3.2 percent decline.

On the deflation front, however, the central bank expects prices to keep falling for another couple of years. A resurgent yen also poses a vexing problem for the country's exporters, whose competitiveness and overseas earnings take a hit as the yen rises.

With so much uncertainty, consumers aren't taking any chances.

Sales at large-scale retail outlets such as department stores and supermarkets tumbled 4.6 percent, after adjusting for the number of stores, according to the trade ministry's report. Overall retail sales in 2009 fell 2.3 percent.

Department stores have been particularly hard-hit, despite government efforts to boost consumer spending. Families last year received cash handouts as well as incentives to buy eco-friendly appliances.

Seven & I Holding Co. announced Wednesday that it will close the Seibu Yurakucho department store later this year. The major anchor store, located near the high-end Ginza district in central Tokyo, has seen sales plunge recently. The company determined it would be "difficult to achieve a recovery in the store's performance."

Due out Friday are other key indicators of Japan's economic health, including industrial production, unemployment and consumer price index data.

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