Japanese retail sales came in more resilient than expected in April, with the pace of their year-on-year increase accelerating to 3.3% (consensus +2.7%) from 3.1% in March despite a third straight drop in department store sales that were hit by slower inbound spending. Overall sales were propped up by recovering new vehicle sales after last year's production suspension by the Toyota Motor group over safety test scandals. Clothing sales chalked up a solid gain while demand for drugs and cosmetics remains strong.

Industry data released last week showed that department sales marked the third straight year-on-year decline in April, down 4.5%, after having slipped 2.8% in March, as the appreciation of the yen lowered the purchasing power of visitors from other countries, leading to a 26.7% drop in inbound spending for a second consecutive slide.

On the month, retail sales rose 0.5% in April, beating the consensus call of a 0.2% dip and following a 1.2% slump in March and a 0.4% gain in February.

The Ministry of Economy, Trade and Industry maintained its assessment after upgrading it for the first time in eight months in the February report, saying retail sales are on a gradual pickup trend. In the previous five months, sales had been taking one step forward and one step back.

Japanese retail sales are forecast to have risen 2.7% on year in April, with the pace of increase decelerating from 3.1% in March, in light of a third straight year-on-year drop in department store sales hit by slower inbound spending. Overall sales appeared to be propped up by higher fuel prices and recovering new vehicle sales after last year’s production suspension by the Toyota Motor group over safety test scandals.

On the month, retail sales are expected to post their second straight drop, down a slight 0.2%, after slipping 1.2% in March and edging up 0.4% in February.

Last month, the Ministry of Economy, Trade and Industry upgraded its assessment for the first time in eight months, saying retail sales are “on a gradual pickup trend.” In the previous five months, sales had been “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.