Japanese confidence at record low

Posted by admin on 12 July, 2008 under Business news | Be the First to Comment

Japanese consumer confidence slumped to its lowest level for 26 years in the quarter to June, official figures show.

The government’s quarterly index fell to 32.3 from 36.5 the period before.

Rising costs for energy and food have hit sentiment, with wholesale prices hitting a 27-year high in June on surging oil and commodity prices.

Japanese households had become used to falling prices after years of deflation and creeping inflation has damaged confidence, say analysts.

Consumers were more reluctant to buy more expensive durable goods, with their willingness to buy items such as cars and household appliances, falling to a record low.

“This is a very bad number,” said Azusa Kato, an economist at BNP Paribas, referring to the Japanese Cabinet Office quarterly index figure.

“People are less willing to buy than after we had a hike in the consumption tax in 1997. Even the Beijing Olympic Games don’t seem to be helping at all,” she added.

The monthly index, which – unlike the quarterly index is not seasonally adjusted – fell to an all-time low of 32.6 in June from 33.9 in May.

Core consumer prices, excluding fresh food and energy costs, rose 1.5% in May – the biggest increase for a decade.

Analysts said inflation may rise to around 2% in the coming months.

Consumers are feeling the rise in the cost living all the more because wage growth in Asia’s largest economy has been so weak.

The economy has shown further signs of weakness over the past few months.

Retailers reported weak earnings in the three months to June, while industrial firms posted disappointing output in May.

The unemployment rate currently stands at 4% and the central bank has cut its 2008 growth forecast.

It expects growth of 1.5%, down from 2.1%, amid continuing worries about the impact of the US slowdown on global markets.

The US slowdown means demand for Japanese cars and machinery continues to fall.

News reported by BBC