— Japan Sep Watchers’ Forward-Looking Index 41.4 Vs Aug 40.0
— Japan Watchers’ Outlook Index Posts 1st Rise In 5 Months
— Japan Govt Downgrades View: Econ Shows Soft Spots After Pickup
TOKYO (MNI) – The Economy Watchers’ Survey index for current
conditions in Japan slumped to an eight-month low of 41.2 in September
from 45.1 in August, posting the second straight drop as the government
ended subsidies for buying fuel efficient vehicles last month, reducing
demand for new cars, the Cabinet Office said on Friday.
Lingering hot weather conditions supported sales of beverages and
air conditioners while there were rush purchases of cigarets before the
tobacco tax was raised on Oct. 1, it said, but added that lower
automobile sales and production, combined with the yen’s dampening
impact on exports, hurt consumer and business sentiment.
The September reading of 41.2 was the lowest since 38.8 marked in
January this year.
The government downgraded its assessment of the sentiment for the
second straight month in the September report.
In the August report, it revised down its view for the first time
in nine months, noting that record heat waves left deserted shopping
streets and dampened autumn goods sales while that the yen’s rise raised
concerns about Japan’s export-led economic recovery,
The latest survey showed that “the economy has been picking up at a
moderate pace but it is now showing soft spots.”
In the August report, it said that “while the economic climate
remains tough, movements for picking up are slowing.”
In July, sentiment was up for the first time in three months,
thanks to robust sales of beverages, air conditioners and refrigerators
amid record high temperatures in many cities. In May, bad weather
conditions dampened consumer spending, causing the headline index to
mark the first drop in six months.
Consumers have generally taken advantage of the government’s reward
program for buying greener electronics and tax breaks for purchases of
energy efficient vehicles.
But as the government finished providing auto subsidies last month
(tax credits will continue), there is a concern that it will hurt sales
and production of passenger cars.
Meanwhile, the headline index stood below the key 50 level — the
dividing line between net positive and net negative responses to the
survey — for the 42nd straight month in September.
The survey was conducted between Sept. 25 and Sept. 30.
The 3.9-point fall in September was due to many more people saying
things were getting “slightly worse” or “worse” and fewer people seeing
conditions as being “slightly better” or “better.” It followed a
4.7-point drop in August.
In the latest month, the household sub-index slipped to 39.5 from
44.9 in August.
The business sub-index (manufacturers and non-manufacturers serving
other businesses) fell to 41.4 in September from 42.7 in August, the
second consecutive monthly drop.
Meanwhile, the labor index edged up to 51.4 in September from 51.3
in August, marking the first m/m rise in three months, as there was a
move among semiconductor makers to hire more people.
This index has shown ups and downs in recent months as the recovery
in wages and job creation is emerging only gradually, lagging the pickup
in production and exports.
The overall forward-looking index, which gauges conditions two to
three months ahead, improved to 41.4 in September from 40.0 in August,
marking the first gain in five months, as all the sub-indexes on
household, business and labor conditions rose from the previous month.
But the index stayed below the key 50 level for 40 months in a row.
In January 2009 the index rebounded to 22.1 from a record low of
17.6 hit in December 2008.
The watchers’ index gauges whether respondents with jobs most
sensitive to economic conditions — taxi and truck drivers, department
store sales staff and restaurant and shop owners — believe economic
conditions have improved or worsened from three months before.
The survey outcome is monitored closely by the Bank of Japan as it
appears to reflect retail sector sentiment more accurately than some
other data.
In July and April 2010, the index for current conditions hit 49.8,
the highest level in about three years since 50.8 in March 2007. Three
years ago, the Japanese economy was still in its longest post-war
expansion period that ended in October 2007.
The 7.0-point slump in November 2009, which is believed to have
been caused by the government’s ill-timed announcement that Japan was
back in mild deflation, was the largest fall since the survey began in
August 2001.
The headline index hit a record low of 15.9 in December 2008 at the
height of the global financial crisis, but posted its first gain in 10
months in January 2009 as more people thought conditions were unchanged
after deteriorating drastically in previous months.
The index then rose for seven months in a row but bad weather
conditions and the pandemic of swine flu hurt sentiment in August 2009.
It fell in October and November 2009 on fears of a worsening deflation
after rising briefly in September.
The outcome of the latest Economy Watchers’ Survey was largely in
line with the latest quarterly consumer sentiment survey conducted by
the BOJ.
The BOJ’s survey showed that Japanese consumer sentiment has
worsened slightly in the past three months in the wake of the strong yen
and slumping share prices, posting the first drop since March 2009.
The consumer economic sentiment diffusion index was nearly flat,
falling to -42.1 in September from -41.2 in June, but it was still above
-62.0 in March 2010 and the record low of -88.9 hit in March 2009, the
BOJ survey released on Oct. 1 showed.
In light of slumping sentiment, the BOJ on Tuesday announced a
drastic shift in policy, cutting the target for the already super-low
overnight interest rate to a range of zero to 0.1% in order to counter
growing risks of an economic slowdown.
The BOJ also plans to launch a temporary fund for buying a total of
Y5 trillion in financial assets including Japanese government bonds,
commercial paper, corporate bonds, exchange-traded funds (ETFs) and
Japan real estate investment trusts (J-REITs).
tokyo@marketnews.com
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