Japanese retail sales turned weaker in December, rising just 2.1 percent on the year, below the consensus forecast of a 5.3 percent rise and slowing from a revised 5.4 percent gain in November, as demand for clothing plunged, vehicle sales slowed and easing inflation put a damper on values of foodstuffs and fuels.

On the month, retail sales plummeted a seasonally adjusted 2.9 percent, versus the median forecast of a 0.5 percent dip, after rebounding a revised 1.1 percent in November and slumping 1.7 percent in October. Demand for winter clothing stabilized after a jump in the previous month, when a cold snap replaced months of warm weather.

The number of visitors from other countries has recovered to pre-Covid levels, generally supporting the retail and tourism industries but the year-over-year increase in department store sales has decelerated.

The Ministry of Economy, Trade and Industry downgraded its assessment, saying retail sales are"taking one step forward and one step back." Previously, it had said sales were"on an uptrend." The three-month moving average in seasonally adjusted retail sales slumped 1.2 percent on the month in December for a third straight drop.

Econoday's Relative Performance Index stood at minus 21, below zero, which indicates the Japanese economy is performing worse than expected. Excluding the impact of inflation, the RPI was at minus 10.

The government said its monthly economic report last week that Japan still needs monetary and fiscal stimulus and growth strategies to keep itself from falling back into deflation, repeating its request first made in May 2022 that the Bank of Japan should"achieve the price stability target of 2 percent in a sustainable and stable manner, accompanied by wage increase."

Japanese retail sales are forecast to have risen 5.3 percent on year in December for the 22nd straight rise after a revised 5.4 percent increase in November, led by solid demand at department stores and for vehicles as well as higher fuels prices. Retail sales are seen down 0.5 percent on the month after rising a revised 1.1 percent previously. Markups by food and beverage suppliers have peaked but still support overall sales values. Spending by foreign visitors at department stores have recovered to pre-Covid levels.

Retail Sales measure the total receipts at stores that sell durable and nondurable goods. The data are part of the Preliminary Report on the Current Survey of Commerce.

Another way to look at consumer spending in addition to the household spending survey is through the retail sales report. This report gives the total value of goods and services sold each month at retail outlets. The preferred number is the change from the previous year. The report serves as a direct gauge of consumption and consumer confidence. Consumer spending is one of the most important leading indicators for the Japanese economy. Increasing sales signal consumer confidence and economic growth, but higher consumption also leads to inflationary pressures.