Japan Consumer Confidence Hits Six-Month Low

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Japan's consumer confidence index dropped for the second straight month in December and slumped to a six-month low, data released by the Cabinet Office showed on Tuesday.

The sentiment index dropped to 37.6 in December from 39.5 in the preceding month. The government lowered its assessment of consumer confidence in the country, saying that it was weakening. The decline in consumer confidence reflects lingering worries about a double-dip in the labor market and growing fears of wage and price deflation, according to economist Julian Jessop.

Among the four sub-indices of households' consumer confidence, three showed a declining trend. The index measuring overall livelihood slipped to 38.2 from 40.4, while that measuring income growth fell to 36.1 from 37.7. The employment sub-index fell sharply to 30.8 from 35 and on the other hand, the sub-index indicating willingness to buy durable goods edged up to 45.1 from 44.8.

Jessop, who is chief international economist at Capital Economics, said the sharp fall in the employment indicator was particularly disappointing and that the early signs of recovery in the jobs market could well be a false dawn. "Today's survey supports the idea that the decline in the unemployment rate has been flattered by discouraged workers who have dropped out of the labor force, because jobs are hard to get and do not pay enough," he said.

The Japanese economy has been dogged by unemployment, deflation and a strong yen that has hurt the competitiveness of its goods in the export market. The economy grew for the second straight quarter between July and September, but its inability to overturn deflation has sparked fears that growth could stall.

Japan's unemployment climbed to 5.2% in November from 5.1% in October, worsening for the first time in four months. Core consumer prices fell 1.7% in November from a year ago, the ninth straight monthly fall. The continued deterioration in incomes has strengthened the resolve of households to economize, leading corporations to respond by continuing to cutting prices for their goods and services, BNP Paribas economist Azusa Kato said in a note.

In early December, the government unveiled a JPY 7.2 trillion stimulus plan to prevent the country from slipping back into recession. Finance Minister Naoto Kan on Monday urged lawmakers to approve the large stimulus package to ensure the economy's return to growth path. In his inaugural parliamentary address, Kan said the foundation for the economy to return to a self-sustained recovery was still fragile.

Japan's consumer confidence index dropped for the second straight month in December and in the process slumped to a six-month low, data released by the Cabinet Office showed on Tuesday. (Market News Provided by RTTNews)