Japan retail sales dip for 7th straight month

By staff and wire reports

TOKYO, Japan -- Retail sales fell again in October, fresh figures showed Wednesday, marking the seventh down month in a row.

Nationwide sales dipped 4.9 percent, compared with a year earlier, the Ministry of Economy, Trade and Industry reported.

Big-store sales fell even faster, off 7.1 percent year-on-year when adjusted for store closings. They reflect consumer spending trends more closely.

"It's a bigger drop than we had expected," Hironobu Akiyama, a researcher at Sumitomo Life Research Institute, told Reuters wire service.

"Labor market conditions and income had already been horrible, and the September 11 incident and the mad-cow disease certainly cannot be positive for consumer sentiment," he said.

Clothing sales were off sharply as shoppers scaled back after buying for autumn. Sales are likely to continue falling, J.P. Morgan said in a report.

One of the only signs of strength were sales of household appliances, up 1.9 percent over the previous month.

Bankruptcies, jobless rate on the rise

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Consumer confidence has been resilient in Japan and in other key economies such as the United States. But there are signs that the global economic slowdown and the aftermath of September 11 are denting it.

The United States reported a shock drop in consumer confidence for November overnight on Tuesday, hitting its lowest in seven years. That is hurting stocks there.

Japan is mired in deflation, as it heads toward its fourth recession in a decade. Despite interest rates that are almost at zero, consumers are still keeping a tight grip on the purse strings.

Unemployment is at a record 5.3 percent. Bankruptcies are at a record high and rising.

Japanese Prime Minister Junichiro Koizumi has warned that more pain is ahead in the form of job losses and companies collapsing, as he pushes his reforms.

There is little going right in Japan now. Just as the United States is battling through an anthrax scare, Japan is contending with its own public-health crisis.

Authorities have confirmed Asia's first cases of mad-cow disease in Japan, where the beef industry has prided itself on exceptionally high standards.

Engineering company collapses

A decade long slump is also taking its toll on the corporate world.

Heavy-equipment maker Niigata Engineering Co. became the latest in the line of corporate failures on Wednesday. It filed for court protection from its creditors, going under with 227 billion yen ($1.8 billion) in liabilities.

It is the 12th public company to collapse this year. Mizuho group bank Dai-Ichi Kangyo is one of its key creditors, at a time Mizuho is ratcheting up pressure on its problem borrowers.

That follows the collapse last week of property insurer Taisei Fire & Marine, which went into liquidation due to reinsurance claims on the planes used in the September 11 attacks.

Long term, economists say there is excess capacity in much of Japan's business and industry, and a huge amount of dud loans at its banks. Correcting both trends will mean more companies going under.

But Japan risks a downward spiral of bad economic factors. Koizumi has already introduced an extra budget to help with job creation and agreed to a second supplement. He faces heavy pressure from within his own party to do more to help Japan.

Reuters contributed to this report.