UPDATE 1-Japan retail sales rise in Feb, suggest rising consumer confidence

(Adds breakdown of data)

* Feb retail sales +1.6 pct yr/yr vs f'cast +1.7 pct y/y

* Sales of food and drinks accelerate in Feb

* Economists say consumption likely to rise moderately this year

TOKYO, March 29 (Reuters) - Japan's retail sales rose in February as shoppers spent more on food, drinks and clothes, suggesting rising wages and a tight labour market are supporting consumer confidence. The 1.6 percent annual increase in retail sales in February was slightly less than the median estimate for a 1.7 percent annual increase and follows a revised 1.5 percent annual increase in January. Rising consumer spending makes it more likely that consumer prices will rise in the future, which could help the Bank of Japan reach its elusive 2 percent inflation target, although its ultra-easy monetary policy will still be in place for some time. Spending on food and drinks rose 2.3 percent in February from a year ago, data from the trade ministry showed on Thursday, picking up from January's 2.0 percent annual increase. Spending on clothes rose an annual 0.3 percent in February, rebounding slightly from a 0.5 percent annual decline in January. Big Japanese companies agreed earlier this month at annual negotiations with labour unions to raise wages for a fifth year. This wage hike could help consumer spending to boost Japan's stubbornly slow inflation, but many companies likely fell short of Prime Minister Shinzo Abe's goal of increasing wages by 3 percent or more. Japan's jobs-applicants ratio, a measure of labour demand, is forecast to have risen to the highest in four decades in February. The data is due on Friday. The nationwide core consumer price index, which includes oil products but excludes volatile fresh food costs, rose 1.0 percent in February from a year earlier, matching the median estimate, data last week showed. However, a narrower measure of consumer prices that excludes fresh food and energy rose an annual 0.5 percent in February, highlighting the snail's pace of underlying inflation.

(Reporting by Stanley White Editing by Eric Meijer)