Japan’s retail sales remained tepid in December, posting only 0.4 percent growth over the same period last year. The data shows that poor consumer spending continues to weigh down on the country's sluggish economy.

December sales were lower than the 1.3 percent gain witnessed in November. However, it was higher than analysts' expectation of 0.3 percent in December.

The data released Wednesday by the Ministry of Economy, Trade and Industry showed that Japan’s retail sales, which measure the change in the total value of inflation-adjusted sales at the retail level, rose 0.1 percent from November, when it fell 0.1 percent.

Sales of large retailers were flat in comparison to December 2011, after gaining 0.9 percent the previous month. However, the sales grew 0.7 percent, if stores not surveyed last year were taken into consideration.

Japan’s gross domestic product contracted 3.5 percent in the third quarter of last year in comparison to the previous quarter owing to weak global demand and the low domestic consumption indicating a deepening of recession in the world's third-largest economy. Besides, exports were seen falling for the seventh consecutive month in December.

However, economists are optimistic of a rebound in the economy in the second quarter, as the U.S. and China markets show signs of recovery.

“Japan’s economy will probably head back to a gradual recovery from this quarter as external demand rebounds, while the government’s stimulus may lend support from the second quarter,” Azusa Kato, an economist at BNP Paribas SA in Tokyo, told Bloomberg before the report was released.

In November, it was reported that Japan’s manufacturing activity contracted to a seasonally adjusted 1.7 percent - much worse than the analysts’ expectation of a 0.5 percent decrease.

The continued shrinking of the manufacturing activity is seen increasing the likelihood of a sharp contraction in the economy.

Earlier this month, the government announced a 10.3 trillion yen ($113 billion) fiscal stimulus to revive the economy weakened by a soft global demand and sluggish domestic spending.