Japan’s consumer confidence hits all-time low for third straight month in August

September 22, 2008
By Ken Worsley

Last month we noted that it was in the government’s best interest to show the public that it was serious about putting together some form of economic stimulus package if it hoped to restore confidence in Japan’s consumers, whose spending makes up about 55% of GDP. Nothing of the sort happened.

Thus, it comes as no surprise that in August, Japan’s Consumer Confidence Index declined for the fifth month in a row and hit a new all-time low for the third consecutive month.

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

Consumer Confidence Index: 30.1 (-1.3)
Overall Livelihood: 28.5 (-0.8)
Income Growth: 35.0 (-1.3)
Employment: 28.4 (-2.3)
Willingness to buy durable goods: 28.3 (-0.9)

Once again, all five scores have fallen. The “Employment” category has been battered over the last three months, having fallen 6.5 points over that time. 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: -13.9
Overall Livelihood: -13.4
Income Growth: -7.4
Employment: -18.6
Willingness to buy durable goods: -17.2

The drops in “Employment” and “Willingness to buy durable goods” are particularly worrisome. Once again, it cannot be said that the government is taking any concrete steps to reassure consumers, although its options are heavily limited. Last month we noted that the government would have put some believable proposal on the table in order to help restore public confidence.

In the interim, Prime Minister Fukuda announced his resignation and the ruling party has been focused almost entirely on itself as it goes through the process of finding a new leader. It seems clear now that Taro Aso will be the next prime minister, and his penchant for deficit spending (ie, public works, pork and favoritism) versus fiscal control is unlikely to win confidence points amongst the public at large. In October we will likely hear that the Consumer Confidence Index dipped below 30 points for the first time ever in September.

Filed Under Cabinet Office, Consumer Confidence Index, Economic Reports