Japan Retail Sales Post Biggest Drop in 4 Years

Japanese retail sales posted their biggest fall in almost four years in December as growing worries about job conditions and wobbly share markets prompted consumers to tighten their purse strings.

A global economic slump since late last year has virtually frozen Japan's exports and production of cars and electronics, and the world's second-biggest
economy is seen headed for its longest recession in modern times.

Retail sales fell 2.7 percent in December from a year earlier against a median market forecast for a 1.6 percent decline and the largest since a 2.8 percent fall in February 2005. "This is a considerably a weak reading. Sales are falling even though some department stores started holiday sales earlier than usual. Households are becoming very cautious," said Hiroshi Shiraishi, an economist at BNP Paribas.

Japanese wholesale prices fell 13.9 percent from a year earlier in December, the largest fall on record in figures going back to 1980.

That provided more evidence of the unprecedented shock that the global slump has caused Japan, coming after record falls in output and exports.

Economists expect industrial output figures for December, due on Friday, to show a fall of 9.0 percent, surpassing the record 8.5 percent fall in November. Exports plunged a record 35 percent in December, data showed last week.

"Some parts of corporate activity have come to a complete halt. The shock
exporters are suffering will from now on affect the broader economy," said BNP
Paribas's Shiraishi.

The data did not produce any market reaction.

The Nikkei share average rose 1.3 percent as the retreat of the yen eased worries over the earnings outlook for Japanese exporters as well as hopes for the U.S. bank rescue plan.  

The yen, which has been views as a safe haven currency during the current
global financial crisis, soared to a 13 1/2-year high against the dollar last
week.

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