28.05.201423:43:05UTC+00Japanese retail numbers down as stocks’ multi-day rally ends

After a string of 5 consecutive days that saw the Topix steadily advance, shares  in Tokyo market’s popular index finally fell on updated economic news and an appreciating yen.

The first retail figures following an increased sales tax in Japan were released today showing a contraction in consumer spending.  It revealed that retail sales dropped by as much as 13.7% in April after government officials marked up the nationwide sales tax by more than half from 5% to 8% at the beginning of the same month. This is vastly different from the previous release in March, when spending spiked as consumers rushed to get ahead of the enactment of the new tax rate.

As of early Wednesday morning, the Topix was hovering at 1,195.50, giving up 0.2% of its worth from the previous close. In gained 4.2% total in the past several days before leading up to today’s losses. The Nikkei 225 likewise took a dip this morning touching the 14,593.18 level with a 0.5% decrease after a mostly favorable week.

The yen, however, rose against both the dollar by 0.1% to $101.73 and the euro by 0.08% to 138.31.

A slowdown in the sales of cars and electronics in the Japanese market contributed greatly to the reduction of sales which was the fastest in the country in 3 years. A similar trend occurred during Japan’s last sales tax in April 1997 which came prior an economic recession amidst the Asian financial crisis.

Nevertheless, the Bank of Japan expects this downtrend to be temporary and for the economy to continue its ongoing expansion. Signs supporting this claim include the limited sales losses in daily necessities, apparel, and toiletries which could already be bottoming out leading to a slow but steady uptake in spending. Spending on more expensive durable goods, however, could take longer to rebound.

The nation’s central bank will have its next policy meeting on June 12 where it will discuss other possible measures it can take to achieve their goal of a 2% inflation in consumer prices.