Japan consumer confidence dropped last month, the most since a record earthquake in 2011, showing the challenges Japanese Prime Minister Shinzo Abe faces in sustaining a recovery in the world’s third-biggest economy.
A sentiment index unexpectedly fell 4.2 points to 41.2, with gauges of views of livelihoods, employment and incomes declining, the Japanese Cabinet Office said yesterday in Tokyo.
A typhoon in the middle of last month around the time the survey was conducted may have lowered the consumer mood.
Abe needs to maintain economic momentum so far driven by fiscal and monetary stimulus ahead of an April increase in the sales tax that he announced on Oct. 1.
Growth is forecast to slow to an annualized 1.7 percent in the third quarter from 3.8 percent in the previous three months, according to a separate Bloomberg survey.
“The decision to raise the sales tax has hurt consumer sentiment,” Tokyo-based Nomura Securities Co senior economist Shuichi Obata said.
The sentiment index was forecast to rise to 45.5, according to a survey of five economists by Bloomberg News.
Abe is balancing the need to improve the fiscal health of a country with the heaviest debt burden in the world against a goal of ending 15 years of deflation and boosting growth.
His reflationary policies pushed down the yen, lifting profits of Japanese exporters while also boosting consumer prices even as wages continue to stagnate.
The Topix index of Japanese stocks has gained 1 percent this month after advancing less than 0.1 percent last month, the worst performer among 24 developed markets tracked by Bloomberg.