Japan’s Consumer Confidence Index hits all-time low in June

July 13, 2008
By Ken Worsley

In May, we saw Japan’s consumer confidence fall to its lowest level since December 2001. Late last week, the Cabinet Office released figures for June, and we now see that Japan’s consumer confidence has indeed fallen to its all-time low. According to the numbers, consumer confidence fell 1.3 points to hit 32.6, which is the lowest score seen since the survey was begun in June 1982 (though it was done quarterly instead of monthly until 2004).

The Consumer Confidence Index generates five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for June’s figures, with the change from last month:

Consumer Confidence Index: 32.6 (-1.3)
Overall Livelihood: 30.3 (-1.2)
Income Growth: 36.6 (-0.1)
Employment: 32.8 (-2.1)
Willingness to buy durable goods: 30.9 (-1.8)

As with May, we saw all five scores fall, though the “Income Growth” category saw much less of a fall than we’ve seen in recent months. For the sake of comparison, let’s take a look at how each score has changed compared to where they were a year ago:

Consumer Confidence Index: -12.4
Overall Livelihood: -12.1
Income Growth: -5.7
Employment: -16.2
Willingness to buy durable goods: -15.5

A year ago, “Income Growth” had the lowest score - at 42.2, while “Employment” was the highest - at 49.0. The employment score has taken the greatest beating over the past year, with willingness to buy durable goods not far behind. A year ago, the economy was starting to feel quite fragile, as the continued threat of deflation loomed and sentiment among consumers was just starting to form a negative trend. The declines over the past year have been significant, and it seems clear that it would take quite some time for them to be reversed, should conditions for that to happen come about.

The “Overall Livelihood” score has now hit a record low for three consecutive months. “Willingness to buy durable goods” also hit its all-time low in June. Consumers continue to be spooked over higher energy and food costs, and the Bank of Japan is publicly stating that it expects to see a continued rise in both areas.

That does seem likely. With the expectation that some very bad news is going to be released in the United States this week, it does not seem impossible that oil prices could surge yet again, and further hurt consumer sentiment in July. Then again, what if we see the oil bubble start deflating?

Filed Under Cabinet Office, Consumer Confidence Index, Economic Reports