TOKYO (Reuters) - Japan’s retail sales rose in September at the fastest pace in three months as shoppers spent more on clothes and daily goods in a sign that consumer spending remains strong due to a tight labor market.
The 2.2 percent annual increase in retail sales in September was less than the median estimate for a 2.5 percent annual increase and follows a revised 1.8 percent annual increase in August.
Strong consumer spending makes it more likely that consumer prices will accelerate in the future, which supports the Bank of Japan’s argument that it can afford to keep its monetary easing unchanged as inflationary pressure gradually builds up.
“Consumption in July-September is likely to be a little bit weaker than the previous quarter, but the outlook remains healthy,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.
“Consumer spending is still in moderate recovery. The labor market will support spending in the future.”
Spending on clothes rose 5.0 percent in September from a year ago, the fastest increase in three months, data from the trade ministry showed on Monday. Spending on daily goods like soap and shampoo rose an annual 1.2 percent, versus a 0.4 percent annual decline in the previous month.
The BOJ is expected to signal that it will hold off on expanding stimulus for the time being at a policy meeting ending on Tuesday.
The policy meeting comes after Prime Minister Shinzo Abe’s victory in a lower house election, which heightened expectations the BOJ’s ultra-loose policy - a key pillar of his “Abenomics” stimulus policies - will continue.
Core consumer prices rose 0.7 percent in September from a year ago, which is distant from the BOJ’s 2 percent inflation target, although the central bank argues that consumer prices will eventually pick up because of the tight labor market and wage growth, albeit slow.
Reporting by Stanley White; Editing by Eric Meijer