Tue, May 17, 2011 - Page 10 News List

Japan consumer confidence dives at a record pace


Japanese consumer confidence fell at the fastest pace on record last month, data showed yesterday, after March 11’s earthquake, tsunami and a nuclear crisis cast a shadow on the economy.

The data showed consumer sentiment worsening to a two-year low of 33.1 last month from 38.6 in March, when the index plunged after Japan’s biggest recorded earthquake and a tsunami on March 11 that devastated the northeast coast.

Readings below 50 indicate pessimism outweighing optimism.

The 5.5 point drop month-on-month was the sharpest since records began in April 2004, government data showed.

Although sales of water and food surged as people stockpiled immediately after the quake and the nuclear crisis at the Fukushima Dai-ichi plant, consumers have held off spending on areas such as entertainment and travel.

Analysts have warned that voluntary self-restraint by consumers will exacerbate any downturn.

Japan’s consumer confidence has remained below its pre-financial crisis levels and retail sales slumped last year after government subsidies for car purchases were withdrawn and incentives to purchase appliances were reduced.

Many see Japan sliding into a temporary recession after the quake and tsunami devastated infrastructure and manufacturing facilities in the northeast, plunging the nation into its worst crisis since World War II.

Japan will report GDP data for the January-March period on Thursday, and economists expect to see a second straight quarterly contraction because of the impact of the disasters.

“While the earthquake occurred late in the quarter, the contraction in activity after the earthquake will likely be enough to bring down the growth rate in Q1 deep into negative territory,” BNP Paribas’ chief Japan economist said in a recent note to clients.

In the aftermath of the disasters, output, activity and spending plunged, while consumer and business confidence took a tumble. Japan has passed an emergency ¥4 trillion (US$49 billion) relief budget to help fund reconstruction after the disaster.

“GDP could easily have fallen by 1.5 percent compared to Q4,” Capital Economics said. “Given the unprecedented nature of the recent disaster, there is a greater than normal degree of uncertainly in any forecasts, but we believe the risks to the consensus view are firmly on the downside.”

However, GDP should start to grow again in the third quarter as initial earthquake-related disruption is overcome and reconstruction spending starts to boost the official figures, analysts said.

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