"Perhaps the biggest threat to consumer spending is the rise in inflation," it said, noting that bustling sales earlier in the summer were probably helped by June bonus payments and overtime.

"Households are probably well aware that once the summer bonus season is over, wages will likely continue shrinking, depressing their purchasing power," it said.

Still, the overall positive tone of the July data will likely bolster support for pushing ahead with a sales tax planned for April 1, 2014. A decision on that plan is due within the next month.

The anticipated 3 percent increase in the nationwide sales tax, to 8 percent, will undoubtedly be a blow, Ishioka said, but she expects it to be short-lived given the currently favorable trends.

"People's sentiment is improving. I think the fundamental conditions are OK," she said.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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