Japan Merchant Confidence

From Bloomberg last week:

Japan's Merchant Confidence Falls to 2 1/2-Year Low

By Jason Clenfield

Aug. 8 (Bloomberg) -- Sentiment among Japan's barbers, shopkeepers and other merchants on the front lines of the economy dropped to a 2 1/2-year low as falling wages and a stock-market plunge discouraged consumers from spending.

The Economy Watchers index, a gauge of domestic demand via a survey of about 2,000 people who deal directly with consumers, fell to 44.7 points in July, a fourth monthly decline, the Cabinet Office said today in Tokyo. A number less than 50 means pessimists outnumber optimists.

Consumer spending last quarter grew at half the pace of the previous three months, the government's gross domestic product report is expected to show next week. The lowest jobless rate since 1998 has yet to reverse a decade-long slide in wages that's constrained spending and left the economy dependent on exports.

``This is a depressing number,'' said Seiji Adachi, senior economist at Deutsche Securities Inc. in Tokyo. ``The expectation that domestic demand will drive the economy is fading fast. Consumers have a lot on their minds.''

The yen traded at 119.01 per dollar at 3:29 p.m. in Tokyo from 118.95 before the report was published. The Economy Watchers index was the lowest since it was 44.2 in December 2004.

``The rainy season dragged on and I think that had a bad effect overall,'' the report quotes a salesperson at an electronics shop in central Japan as saying. ``There was no particular problem, but overall sales have been soft.''

Earthquake, Typhoon

An earthquake, a typhoon and a 3.9 percent drop in the Topix stock index during the month may have added to the traditional reasons for consumer pessimism: falling wages and rising taxes.

Wages have failed to grow so far this year, even with unemployment at a nine-year low of 3.7 percent. Pay only rose 0.3 percent in 2006, after falling 10 percent between 1997 and 2005.

A rollback of tax rebates in June added about 14,000 yen ($110) to the average tax bill for a family of four. The Social Insurance Agency said in May that the mishandling of pension records could result in billions of yen in unpaid benefits.

The Cabinet Office said an earthquake that hit Niigata, northwestern Japan, had a limited effect on merchants' confidence. Only about 2 percent of the survey's respondents mentioned the quake, which killed 11 people and damaged a nuclear power plant.

``Summertime personal consumption has been far from boisterous and we see a risk of continued slowing in July- September,'' said Takehiro Sato, chief economist at Morgan Stanley Japan Securities Ltd.

Prospects for consumer spending remain gloomy, today's survey showed. The outlook index, a measure of expectations for the next two to three months, fell to 46.7 in July, also the lowest since December 2004, the Cabinet Office said.