Japan’s Consumer Confidence Index Down for Third Consecutive Month in July

August 10, 2007
By Ken Worsley

The Cabinet Office released its monthly Consumer Confidence Index this afternoon, and the July results were not pretty. The overall consumer confidence score was down 0.6 points, falling from 45 in June to 44.4 points.

The overall score has not been at the 50 level since April of 2006, when it hit 50 exactly. The last time the score stood over 50 was for the second quarter of 1990, when it was at 50.3. July’s score was the lowest since December 2004, when it hit 44.

July’s survey was carried out on June 15, 2007, and covered 6,720 households (4,974 households of two or more and 1,746 single-person households). Single-person households are excluded from the data covered in this post. The number of single-person households remained unchanged in July after having risen 3.83% from May to June.

The report generates five total scores: The Consumer Confidence Index, Overall livelihood, Income Growth, Employment, and Willingness to buy durable goods. A score above 50 indicates positive public sentiment on that index. A number below 50 indicates negative sentiment.

Broken down by categories (change from previous month):

Consumer Confidence Index: 44.4 (-0.6)
Overall Livelihood: 42.3 (-0.1)
Income Growth: 41.9 (-0.3)
Employment: 47.5 (-1.5)
Willingness to buy durable goods: 46 (-0.4)

For the second consecutive month, all five scores were down, and all five were below 50. Although the rate of the drop was lower than June, this is still negative news. Consumer spending represents just over half of Japan’s GDP, and numbers like these do not bode well for the short (getting intermediate) term.

How negative is the consumer view? Here are some charts for your viewing pleasure (Click to see full-size versions):

1. Consumer Confidence Index, all five indexes - January 2006-July 2007

2.Consumer Confidence Index, 2006-2007 Year-on-Year

3.Overall Liveliness, 2006-2007 Year-on-Year

4. Income Growth, 2006-2007 Year-on-Year

5. Employment, 2006-2007 Year-on-Year

6. Willingness to buy durable goods, 2006-2007 Year-on-Year

Sudden, sharp drops across the board. This survey is fickle, however, and it’s not impossible to see sudden returns to healthier levels in a short time. As we know, the government is considering raising national public servant salaries for the first time in nine years, largely through increases in bonuses (though this will apply chiefly to workers in their 20s).

At the same time, the tax commission is also considering a plan to raise taxes on retirement bonuses and pensions…

Filed Under Cabinet Office, Consumer Confidence Index, Economic Reports