Japanese retail sales in January moderated only slightly to a 2.3 percent gain on the year after increases of 2.4 percent in December and 5.4 percent in November, as sales of vehicles and clothing lost more steam after recent gains and easing inflation continued lowering the values of foodstuffs and fuels. The consensus forecast was a 2.0 percent rise.

On the month, retail sales rose a seasonally adjusted 0.8 percent, shy of the median forecast of a 1.2 percent increase, after plunging an upwardly revised 2.6 percent in December, when relatively mild weather dampened demand for winter clothing and heaters. A cold snap in November had boosted sales of those items.

The number of visitors from other countries has recovered to pre-Covid levels, supporting retailers. The year-over-year increase in department store sales picked up after slowing in December, but looking ahead, sharp gains are unlikely as sales have already recovered from the pandemic slump and pent-up demand has waned.

The Ministry of Economy, Trade and Industry maintained its assessment after downgrading it last month, saying retail sales are"taking one step forward and one step back." Previously, sales were"on an uptrend." The three-month moving average in seasonally adjusted retail sales slipped 0.2 percent on the month in January for the third straight drop after slumping 1.1 percent in December.

Econoday's Relative Performance Index stands at plus 2, just above zero, which indicates the Japanese economy is performing largely as expected. Excluding the impact of inflation, the RPI is at minus 16.

The government said in 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 2.0 percent on the year in January, slowing further from an upwardly revised 2.4 percent gain in December and a 5.4 percent rise in November, as automobile sales declined after recent gains on improved supply. Spending by foreign visitors have been supporting department store sales but domestic punt-up demand has cooled. On the month, retail sales are expected to partially rebound 1.2 percent after plunging 2.6 percent (revised up from 2.9 percent) in December, which prompted the METI to downgrade its view, saying retail sales are"taking one step forward and one step back." Previously, sales were"on an uptrend."

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.