Japanese Consumer Mood Slips in Challenge to Abenomics

Wednesday, 10 Jul 2013 07:44 AM

 

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Japanese consumer confidence slipped in June for the first time in six months as consumers reported slowing income growth and rising prices, exposing the challenges to Prime Minister Shinzo Abe's plan to revive the economy by generating inflation.

Household sentiment fell 1.4 points from May to 44.3 in June, with the mood worsening for all four components — livelihood, income, jobs and spending appetite for durable goods, the government survey showed.

The survey showed 83.9 percent of respondents expect prices to rise a year from now, up 0.8 point from the previous month to the highest ratio in nearly five years.

Abe has pursued a policy of aggressive stimulus, dubbed Abenomics, to revive the economy and end 15 years of deflation. The early signs have been encouraging, but the plan in part relies on growth boosting wages — something yet to be seen.

Indeed, the survey's index of income growth fell 0.6 point to 41.6 in June, the first fall in six months.

The Bank of Japan is hoping its strong commitment to boost prices through massive stimulus would change the widely-held perception that deflation will persist and so encourage consumers to spend now rather than later.

The survey found consumers expecting prices to rise as higher raw material costs and a weaker yen push up electricity bills and prices of groceries, but the perceptions of weak wages could see them tighten spending.

Japan's corporate goods price index, which tracks wholesale price moves, rose 1.2 percent in June from a year earlier, the biggest increase since November 2011, the BOJ said on Wednesday.

The government's sentiment survey, which began in 1982, targets households with two more people. A reading below 50 in the sentiment index shows pessimists outnumber optimists.

© 2014 Thomson/Reuters. All rights reserved.

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