Japan Consumer Confidence:

Article Source:  https://mainichi.jp/english/articles/20220303/p2g/00m/0bu/053000c

Article

TOKYO (Kyodo) -- Japan's consumer confidence worsened in February for the third consecutive month due to surges in coronavirus cases and rising raw material prices, the government said Thursday.

The seasonally adjusted index of sentiment among households made up of two or more people fell 1.4 points to 35.3, its lowest level since May 2021, the Cabinet Office said.

The index indicates consumers' economic expectations for the coming six months, with a reading below 50 suggesting that pessimists outnumber optimists.

Ideas:

The consumer confidence index might be at 35.3, which is not good, if 50 or higher indicates optimists, but it must be remembered its just a number on an index.

Consumers, as people, are always changing their minds. For example maybe today they take the consumer confidence survey but next week they spend in a normal way as maybe they don't feel pesimistic about what is happending.

Consumer behavior is very hard to predict or measure correctly as consumers are people and are always changing their minds on what they do.

While the virus cases are decreasing the raw materials prices in Japan and globally continue to increase, which might mean some companies are might pass on their increased costs to the next in the supply chain, which eventually could include the final consumer.

Article:

The Cabinet Office lowered its basic assessment of the index for the second straight month, saying consumer confidence has been "weakening." The term was used for the first time since January 2021, when the country was facing its third wave of virus infections.

During the Feb. 8-21 survey period, the Omicron coronavirus variant continued to spread and many prefectures were under a coronavirus quasi-state of emergency. Restaurants and bars were asked to close early and stop or limit the serving of alcohol.

Since Russia's invasion of Ukraine has put further upward pressure on crude oil and other raw material prices, "Trends of infection cases and price hikes of resource costs need to be closely watched," a Cabinet Office official said.

Ideas:

Consumer spending and consumer confidence have always been a challenge for the Japanese economy. There might be several reasons why they have always been a challenge.

One reason might be that Japanese workers, overall, have not received any increases in their salaries for many years. And as their expenses increase they become even more reluctant to spend.

Another reason might be that the Japan population is becoming older each year. South Korea and Japan are the leading age related countries, meaning they are ageing faster than all other OECD countries. 

The aged population tends to spend less than those in the <65 age groups, and especially if they are on fixed incomes.

And reason, as mentioned above is expenses keep going up in many different areas such as supermarket prices, gasoline prices for driving, home energy prices, and now the passing on of costs to the final consumer, which means some or many consumers might be feeling the increase in costs.

Article:

All of the four components of the survey fell. Among them, consumers' assessment of livelihoods dropped 1.4 points to 35.4, after a 1.8 point decline in January.

The survey showed a total of 91.7 percent of households expected consumer prices to rise in the year ahead, the highest rate since comparable data became available in April 2013.

The consumer confidence survey covered 8,400 households, including 2,267 single-member households, with valid responses received from 6,659, or 79.3 percent, of them.

Ideas:

Consumer spending in Japan is only about 50 percent of Japan's GDP, which for other advanced economies consumer spending is 60 percent or more. So that extra 10 percent might be the difference between a strong growing economy and an economy that is struggling to grow.

While exports are usually a strong area of the Japanease economy, an economy can't rely on exports alone to grow. 

An economy needs a balance between consumer spending, business investment/spending, exports, and sometime government spending as needed to overcome any shortcomings in the other areas.

An area that needs to be watched very carefully is the weak Japanease yen, which means imports prices are going to continue increase, which means more and more of the import costs are going to be passed on to whomever in the supply chain.

A weak currency usually helps exporters but it a major problem for importers, especially as Japan is a resource poor country which means Japan has to import a large part of it resources needed.

And then add in the Ukraine war and maybe import prices are going to become even more expensive in the future.

Have a nice day and be safe!