Japanese retail sales rose a weaker-than-expected 1.2 percent on year in March as solid department store sales and elevated food and beverage prices continued mitigating the impact of suspended vehicle output, but the pace of increase slowed from an upwardly revised 4.7 percent gain in February, which was partly boosted by leap year effects. The consensus forecast was a 2.8 percent rise.

Strong inbound spending and high demand for luxury brand goods continued to boost department store sales while lower temperatures in the first half of the month dampened spring clothing sales.

On the month, retail sales posted their first drop in three months, falling a seasonally adjusted 1.2 percent, also below the median forecast of a 0.6 percent increase, in payback for an upwardly revised 1.7 percent jump in February.

The METI maintained its assessment, saying retail sales are"taking one step forward and one step back." The three-month moving average in seasonally adjusted retail sales rose 0.2 percent on the month in March after rising at the same pace in February and falling in the previous three months.

Econoday's Relative Performance Index stands at minus 14, below zero, which indicates the Japanese economy is performing slightly worse than expected. Excluding the impact of inflation, the RPI is at plus 11.

Japanese retail sales are forecast to have risen 2.2 percent on the year in March after an upwardly revised 4.7 percent gain in February, led by solid department store sales and elevated food and beverage prices that continued to ease the impact of slow vehicle shipments as a result of suspended output over a safety scandal. On the month, retail sales are expected to post a third straight increase, up 0.6 percent after a solid 1.7 percent rise. The METI regards retail sales as"taking one step forward and one step back."

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.