The Wall Street Journal-20080119-Weak Japanese Consumer Sentiment Further Clouds Outlook
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Weak Japanese Consumer Sentiment Further Clouds Outlook
TOKYO -- Japanese consumer sentiment stood at its most pessimistic level in 4 1/2 years in December, indicating worsening private spending could drag down economic expansion.
Other indicators, such as service-sector-activity data in November, also hint that Japan's economy could be facing anemic growth or even a recession, analysts say, making the likelihood of a rate rise weaker this year.
Also on Friday, the government maintained its view that the economy is recovering and upgraded its assessment on housing construction and imports in its January report, but it warned about risks from continuing problems in the U.S. subprime-mortgage market.
The Cabinet Office's consumer-confidence survey released Friday showed sentiment in December deteriorated for the third straight month, to 38, its most pessimistic reading since June 2003, when it stood at 36.9.
Behind such a big fall are growing concerns that prices will continue rising amid escalating crude-oil and commodity prices, the government said.
The percentage of consumers surveyed who expect prices to rise a year from now climbed to 84.2% in December, its highest level since April 2004, the Cabinet Office said.
Meanwhile, the Ministry of Economy, Trade and Industry said its monthly tertiary-activity index rose 0.1% to 110.6 in November. But the margin of growth was smaller than a revised 1.2% in October.
Those results come amid an increasingly cloudy outlook for the world's No. 2 economy. Corporate profits and capital expenditures are softening, wage growth is sluggish and Japan's most important export market, the U.S., may be headed toward or in a recession. Hurting consumer and corporate sentiment further, the Tokyo stock market continues its slide, and fuel and commodity prices are skyrocketing.
"Japanese consumers and companies are getting more bearish about the outlook for the [country's] economy because of bad news related to global financial markets and economies," said Tomoyuki Ohta, senior economist at Mizuho Research Institute.
"In addition, while workers' wages remain sluggish and stock prices are on the way down, prices of daily essentials including foods have been increasing," he said. "Under such circumstances, consumers could keep trying to tighten their purse strings."
Shinko Research Institute economist Norio Miyakawa echoed the view. He said private spending is unlikely to pick up soon, probably exerting a harmful influence on other sectors. "The Japanese service sector is struggling since consumer consumption remains weak," he said.
One factor, he said, is that financial services are likely to be hit, as customers concerned over U.S. subprime problems will be jittery about purchases of new financial products.
Separately, the Cabinet Office kept the wording in its monthly economic report unchanged from the previous month. "The economy is recovering, while some weaknesses are seen," the report said. The report also upgraded the government's view on domestic housing construction for the second straight month, thanks to recovering housing starts, and it raised its view on imports for the first time in 20 months.
Still, the government is increasingly concerned about how a slowing U.S. economy and financial-market tremors in the U.S. may affect growth in Japan. High oil prices are another worry.
"The economic recovery is continuing, but future downside risks are increasing," Japanese Economy Minister Hiroko Ota said at a news conference after the release of the report. She also said the Japanese economy "cannot be considered first-rate anymore."
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Takashi Mochizuki and Akane Vallery Uchida contributed to this article.
