— Adds Inflation Expectations at Bottom
— Japan Aug Consumer Confidence Index 42.4 Vs 43.3 In July
— Japan Govt Downgrades View: Consumer Confidence Marking Time

TOKYO (MNI) – Japan’s Consumer Confidence Survey index slumped to
42.4 in August from 43.3 in July, posting the second consecutive
month-on-month drop, as fewer people were certain about their overall
economic well-being and job security for the coming months, the Cabinet
Office said on Thursday.

The Cabinet Office downgraded its assessment from the previous
month for the first time since December 2009, saying: “Consumer
confidence is marking time after showing moves for an improvement.”

Last month the government said consumer confidence appeared to be
improving.

August’s 0.9-point m/m fall followed a 0.2-point fall in July and a
0.7-point gain in June, when the headline index hit 43.5, the highest
level since September 2007, when it was at 44.1.

From a year earlier, the overall index still rose 2.3 points in
August, marking the 16th consecutive year-on-year rise, after rising 3.9
points in July.

Before the sixth consecutive month-to-month rise through June 2010,
the index dropped for the second straight month in December 2009. The
decline in November 2009 was the first in 11 months.

The overall index recovered steadily through September 2009 from
the record low of 26.2 hit in December 2008. The index reached its most
recent peak of 48.4 in February 2007.

In today’s data, the sub-index on income growth was flat but the
remaining three sub-indexes on employment conditions, overall economic
well-being and willingness to buy durable goods fell from the previous
month.

The index showing sentiment on asset values, which is not included
in the overall consumer confidence index, stood at 38.7 in August, down
0.7 point from the previous month and after being flat in July.

The latest survey was conducted on Aug. 15, covering 6,720
households, of which 5,042 responded.

The survey also showed that consumer inflation expectations
remained relatively stable in August although the ratio of people
foreseeing higher prices fell slightly while that of people expecting
price drops grew.

The number of people forecasting higher prices ahead showed the
first drop in two months after posting the fifth straight month-on-month
rise through May.

Meanwhile, the ratio of people expecting lower prices in a year’s
time slightly rose to 12.7% of the total in August from 11.9% in the
previous month, up for the second month in a row.

But it was still much lower than the record high of 31.9% hit in
December 2009. The record low for those expecting price drops was 2.4%
marked in July 2008, when crude oil prices hit all-time highs.

Of the total, 8.6% of people said they projected a price drop of
less than 2% in August, up from 7.9% in July.

Of all the respondents, 44.5% said they expected prices to rise in
a year’s time in August, down slightly from 44.7% in July. This compared
with the record low of 29.2% marked in December 2009.

In August, those projecting inflation below 2% accounted for 23.6%
of the total, down from 23.8% in the previous month.

The survey showed that 14.4% of those polled forecast an annual
inflation rate between 2% and 5% in a year’s time, up from 14.3% in the
previous month.

The ratio of people who projected unchanged prices fell to 34.0% in
August from 34.8% in July, marking the second straight monthly drop.

tokyo@marketnews.com
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