Posted on: Wednesday, October 23, 2002

Japan survey finds more pessimism in consumers

By Kanako Chiba, Ann Saphir and Daisuke Takato
Bloomberg News Service

TOKYO — Japanese consumers became more pessimistic in the third quarter as prospects for employment and wages slumped, a survey showed.

Consumers were less confident on three of five topics in the Cabinet office's confidence index. While the index rose to 39.6 in September from 39.3 in June, it would have fallen had it not been for increased confidence that prices won't rise.

A reading below 50 shows that pessimists outnumbered optimists.

Japan's economic recovery may falter as companies such as Fujitsu Ltd. fire workers in response to falling exports.

That's likely to weaken consumer confidence and sap their spending, which makes up more than half of the world's second-largest economy.

"More people are pessimistic than optimistic, and the recovery is already beginning to slow," said Motomitsu Honma, an economist at Mitsui Sumitomo Asset Management Co. "Deflation might be a consumer's friend, until it ripples into their wages."

Japanese consumer prices haven't risen for more than four years.

That has undermined corporate profits and inflated the value of debt, driving some companies into bankruptcy and prompting others to slash jobs and costs.

"Confidence is being supported by the strengthening of deflation expectations," said Yoshihiko Senoo, head of research at Japan's Economic Planning Agency. "We have lowered our assessment of consumer confidence."

The sub-index that measures expectations for inflation rose 3.5 points to 47.5.

The sub-index for income growth fell to 37.6 from 38.5, while the employment sub-index fell to 29 from 30.6.