Japanese consumer sentiment at a new low

In a period of falling export demand, domestic demand is also faltering as Japanese consumer confidence is at a 26-year low.

The confidence index dropped to 29.4 in October from 31.4 in September and it is the lowest since the government began collating data back in 1982.

The Bank of Japan’s Deputy Governor, Hirohide Yamaguchi, said yesterday that the economy had slowed on the back of both falling exports and lower domestic consumer confidence, meaning that greater attention should be paid to economic risk.

Prime Minister Taro Aso last month promised a 2 trillion yen in tax cuts in order to protect the Japanese people from the economic downturn, although increased pessimism about job security and energy/food bills has deteriorated any perceived benefit.

As a result, personal spending dropped for the seventh consecutive month in September, even though wages grew by 0.1 percent.

Economists have indicated that given the state of the economy, it is little wonder why sentiment is so low.

The central bank did lower its key overnight lending rate to 0.3 percent last month following the Nikkei’s poor performance. However, exporters have seen little benefit as the increased strength of the currency over the short term has dented their profits.

It has meant that small, medium and even large corporations such as Toyota, the world’s second largest car manufacturer, to make 3,000 job cuts over the next 5 months.

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