Mixed readings on the Japanese economy

TOKYO - Retail sales in Japan in June surprised to the downside, contracting by 0.2% m/m sa (consensus: +0.8% m/m) after gains of 1.5% m/m in May, mainly due to a drop in fuel sales on rising oil prices. On a year-over-year basis, retail sales growth still managed to record a positive 1.6% y/y in June after growth of 0.8% in May. Separately, June CPI data released last Friday registered positive inflation of 0.2% y/y (consensus: 0.1%) for the first time since June 2012, on signs that the aggressive monetary easing and yen weakness are working to end deflation, albeit still well short of the Bank of Japan’s 2% target.