Japan retail sales
Light is cast on a Japanese 10,000 yen note as it\'s reflected in a plastic board in Tokyo, in this picture illustration

Japan's retail sales dropped more-than-expected in February, further underscoring the weak conditions, though the Bank of Japan's new governor suggests that the economy is on recovery track.

According to the Ministry of Economy, Trade and Industry, sales were down 2.3 percent year-on-year during the month, more than the analysts' forecasts of a 1.2 percent fall.

The weak data comes as the government continues efforts to boost consumer demand to offset the weak external conditions and beat the stubborn deflation levels that have plagued the economy in recent years.

However, on a month-on-month basis retail sales rose 1.6 percent in February, indicating that the economy may be rebounding from the lows. Analysts point out that the Prime Minister Shinzo Abe's pro-stimulus approach does appear to have improved confidence.

"We are seeing more optimism with the Japanese consumers and households," Martin Schulz of Fujitsu Research Institute in Tokyo told BBC.

"They are now hopeful that Mr Abe's policies will help revive Japan economy and put it back on a growth track."

Similar sentiments were echoed by Bank of Japan's recently appointed governor Haruhiko Kuroda early in the day as he said that the economy has stopped weakening and could show recovery signs by the middle of the year.

"The bank currently assesses that the economy has stopped weakening," Kuroda told lawmakers while presenting the bank's semi-annual report, according to AP.

But he added that there still remained a high degree of economic uncertainty due to the European crisis, the fragile US recovery and shaky connections with China.

Kuroda's comments come after his recent pledge to take aggressive steps to accelerate efforts to meet the recently-hiked 2 percent inflation target. However, to boost demand and inflate consumer prices, the government has to ensure that consumer confidence remains strong.

Analysts point out that the consumer confidence should see a sustained recovery over months to have a significant impact on the economy and for that to happen, there should be an increase in wages.

"Nominal wages have actually been falling in Japan's deflationary economy over the past years," Schulz added.

"That needs to change. We need to see salaries rise across the board that will help boost the spending power of consumers".