A Bit of Both from the Domestic Economy

This small snippet is really a recognition of the fine job by Ken Worsley who maintains the Japan Economy and News blog. Between him and JEW you should be able to find top notch economic commentary and coverage on Japan. So what is in store this time? Well, as I have argued before regarding the much hailed August meeting at the BOJ much will depend on the outlook of domestic demand. In fact, I have argued that the BOJ might feel vindicated to sneak a raise past the post on the back of a potentially strong reading in June's consumption and inflation figures. On that note, what might we expect on this accout then?

Firstly, as Ken Worsley reported recently department store sales rose rather briskly in June which underpins the probability of an above average reading in June's overall figure for domestic consumption out at the end of this month.

After having seen sales drop 0.4% in May, the nation’s department stores saw a rise in sales for the first time since February of this year as June sales increased by a whopping 5.5% to 634.9 billion yen versus June of 2006.

The survey covered sales at 278 department stores operated by 94 companies nationwide. The surveyed shops reported employing 95,220 people, up 6.4% from a year ago. The total amount of shop space (measured in square meters) was unchanged.

However, as we see today (once again via Ken Worsley) sales in supermarkets were down 1.5% in June which marked the 40th consecutive drop.

On the heels of last week’s strong supermarket sales data [edit: I am pretty sure he means department store sales here], we still have not such good news coming from the supermarket sector. In June, supermarket sales across Japan were down 1.5% year on year, showing a fall for the 18th consecutive month, and now for 39 of the last 40 months.

This month’s data covered 8,645 shops owned by 79 companies employing 446,515 workers - 129,599 full time and 316,916 part time. Interestingly, while 31.5% of the full-timers were women, that group made up 90.87% of the part-time work force.

As we can see the evidence of a sustained pick up in domestic demand is far from decisive in Japan and neither as it were is the evidence from June where we just have to wait a little more to see I guess. In this respect, note that Ken points to Friday this week for data on retail sales and to Thursday next week for the aggregate household spending data for June. Another very interesting point here is Ken's remarks on part time jobs. I can tell you that he is not the only one who has been scratching his head lately on this. Remember that Japan, despite ever tighter labor market conditions, is still seeing decline in real wages and the relative weight of part time jobs could have something to do with this.