Cabinet Office outlook unchanged, consumer confidence down: Yen to slide?

April 17, 2007
By Ken Worsley

Yesterday, the Cabinet Office released its monthly report on the state of Japan’s economy, and the overall outlook has remain unchanged from the past few months. The report essentially states that the long-awaited upturn in consumer spending is finally starting to shape up, although the government foresees an upcoming downturn in industrial production. It has been speculated that the downgrade in expected industrial production might be used as pressure to hold the Bank of Japan back from raising interest rates in the next few months.

This afternoon, the Cabinet Office also published its Consumer Confidence Survey results for March. According to the report, “This survey was carried out on March 15, 2007, and covered 6,720 households (households more than two-persons are 5,040,one-person households are 1,680).”

Although February’s report had shown an increase in consumer confidence for the second straight month, March data showed a decrease from 48.4 to 46.8 in the overall consumer confidence score. This is the lowest figure since December 2006.

Broken down by categories (change from previous month):

Overall score: 46.8 (-1.6)
Overall Livelihood: 43.9 (-1.8)
Income Growth: 42.9 (-2)
Employment: 51.4 (-1.3)
Willingness to buy durable goods: 48.9 (-1.2)

Only the “Employment” score remain above the 50 point level, and thus can be considered a positive result. Last month, both “Employment” and “Willingness to buy durable goods” were both over 50.

Some are anticipating that these results, which seem certain to hold off the possibility of an interest rake hike in the near future, seem certain to continue to drive down the value of the yen versus both the dollar and the Euro.

Filed Under Cabinet Office, Consumer Confidence Index, Economic Reports