Japan economy watcher sentiment in Oct. drops to 8-year low after tax hike

Business sentiment among workers with jobs sensitive to economic trends dropped to its lowest level in eight years in October due to sluggish sales after a consumption tax hike at the start of the month, government data showed Monday.

The diffusion index of confidence among "economy watchers" such as taxi drivers and restaurant staff decreased 10.0 points from September to 36.7, the lowest since May 2011 when consumption remained depressed after massive earthquake and tsunami hit northeastern Japan in March that year.

The size of the decline was the steepest since April 2014, when the index dropped a seasonally adjusted 15.7 points after the consumption tax was lifted to 8 percent from 5 percent. The tax rate was further increased to 10 percent in October this year.

Business sentiment, which declined for the first time in three months, was also weakened by the effect of a series of natural disasters hitting Japan in October, including Typhoon Hagibis, a government official said.

A reading below 50 indicates that more respondents reported worsening rather than improving conditions over the past three months.

Despite the sharp drop in the index, the Cabinet Office maintained its assessment that "The economy has shown weak movement in its recovery," with the official describing the impact of the tax hike and disasters as "temporary factors."

In the survey, a clerk at a home appliance store in the Koshinetsu region, central Japan, said the number of customers had declined following a period of increased demand ahead of the tax hike.

Meanwhile, the diffusion index gauging the economic outlook in the coming months rose 6.8 points to 43.7 as many respondents expect the negative impact of the higher tax rate is likely to wane in the near future.

A worker at a department store in the southern Kanto region in eastern Japan said an economic recovery is likely to come earlier than it did after the previous tax hike as the year-end shopping season is looming.

The survey covered 2,050 people from Oct. 25 to 31, of whom 1,830, or 89.3 percent, responded.

Source:
The Mainichi, November 12, 2019