Japan's retail sales rise for first time since quake

Electronics shop in Japan Japanese consumers refrained from spending in the aftermath of the earthquake and tsunami

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Retail sales in Japan have risen for the first time since the earthquake and tsunami hit the country in March.

According to the latest official data, retail sales rose 1.1% in June from a year earlier, indicating that the economy is beginning to recover.

The rise comes after three successive months of falling sales as consumers stayed away from shops in wake of the devastation caused.

Compared with the previous month, retail sales rose by 2.9%.

Analysts said the data indicated that things were starting to return to normal in Japan.

"You should expect a bounce back to where things were before the earthquake and tsunami struck," said Richard Jerram of Bank of Singapore.

Growing confidence

The earthquake and tsunami on 11 March caused widespread devastation in Japan.

Start Quote

We are seeing that production is picking up, and that is feeding through to the consumer sentiment”

End Quote Martin Schulz Fujitsu Research Institue

The country's supply chain was disrupted, resulting in some of the biggest factories suspending or curbing production.

While that had a significant impact on the Japanese economy, analysts said the rapid pace of recovery had boosted morale.

"I think the actual restarting of production has happened faster than people expected," said Mr Jerram.

Martin Schulz, of Fujitsu Research Institute in Tokyo, added that the return of Japanese factories to near-full capacity had played a key role in getting consumers back to the shops.

"We are seeing that production is picking up and that is feeding through to consumer sentiment," he said.

He explained that as output in Japanese factories returned to normal, people were feeling more secure about their jobs and hence were more willing to spend.

"Consumer levels had been depressed after the quake, but it is rebounding back. People are overcoming their concerns," he added.

Future concerns

Despite the recovery in production and the latest rise in retail sales, analysts said there were still concerns about the long-term impact of the quake and tsunami, not least due to the energy problems in the country.

Destroyed infrastructure in Miyagi prefecture The earthquake and tsunami caused widespread damage to Japan's infrastructure

Japan has been facing a power shortage after the quake and tsunami led to the closure of several nuclear plants.

Analysts say that, given the reluctance to restart nuclear plants, Japan needs to come up with a long-term plan in order to meet its energy demands.

"One of the biggest issues is drafting a future for Japan's energy situation," said Mr Schulz.

"They [the government] have been focussing on just solving the immediate problems," he added.

Analysts added that the delay in coming up with a dedicated reconstruction budget was also a big cause of concern.

"So far there has been no political agreement on drafting a reconstruction budget," said Mr Schulz.

He added that the government had been using leftover funds rather than come up a separate budget for reconstruction.

The second supplementary budget that was passed recently was not enough. "It's like having version 1.2 of the initial budget," he said.

Mr Jerram of Bank of Singapore said that "political dysfunctionality is proving to a barrier in putting together a medium to long-term plan".

"There was a period after 11 March when it looked they will all co-operate, but that hasn't lasted long," he said.

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