October 10, 2014 / 5:57 AM / 5 years ago

Japan consumer mood dips as sales tax hike saps morale

TOKYO (Reuters) - Japanese consumer confidence worsened for a second straight month in September, suggesting the government’s policy efforts to boost shopper sentiment and promote growth are losing traction. The survey’s sentiment index for general households, which includes views on “overall livelihood,” incomes, jobs and readiness to buy durable goods, was at 39.9 in September, down from 41.2 in August, the Cabinet Office said on Friday.

A shopper stands in front of Halloween goods at a luxury department store in Tokyo September 25, 2014. REUTERS/Yuya Shino

September’s reading was the lowest point since May’s 39.3, a month after the government raised the sales tax to 8 percent from 5 percent. Readings below 50 in the sentiment index show how far pessimists outnumber optimists.

“Consumer sentiment is stalling,” the Cabinet Office said in its assessment of the index, downgrading from August’s depiction of confidence as “moderating”.

The survey found 87 percent of respondents expected prices to rise a year from now, up 0.9 point from August and rising for a third straight month. Four percent of respondents believed prices would fall, up 0.6 point from the previous month.

The government’s survey on consumer sentiment, which began in 1982, targets households of two or more people.

Japanese retail giant Seven & I Holdings (3382.T) turned in a first-half profit below its own expectations, while slowing growth at its core 7-Eleven convenience store chain pointed to weakening consumer spending.

Wednesday’s service sector sentiment index stayed below the 50-point threshold that separates pessimism from optimism for the second straight month.

There are also growing worries that recent falls in the yen are undermining the economy, especially households and small to medium-sized firms hit by the rising price of imports.

Prime Minister Shinzo Abe must decide by year-end whether to proceed with another sales tax rise to 10 percent in October 2015, a task complicated by the weakness of consumer sentiment since April’s tax rise.

A recent run of bleak data including a drop in factory output, weak consumer spending as well as a sluggish recovery in exports, suggests any expected rebound in the third quarter could be moderate at best.

Editing by Chris Gallagher and Eric Meijer

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