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Japan consumer confidence softening.

According to an October 14, 2007 report filed by Kyodo News (New York), "Consumer sentiment in Japan for September rose to the highest level in more than eight years, reflecting the economic upturn, particularly improved employment, the government said Thursday."

But the September 2007 confidence numbers may not accurately represent the situation. A September 12, 2007 report from Mitsubishi UFJ Securities, examining spending in July 2007 said, "Real expenditures for July ("Survey of Household Economy, Two or More Person Households") fell by 1.2 percent from the previous month, and its average for the April [2007] to June [2007] quarter fell by 1.4 percent from the previous quarter, which was a large fall."

Mitsubishi attributed the sharp decline in spending to, first, a number of weather related incidents. Temperatures were lower than they were in the second quarter 2007 than they were in the second quarter 2006. And the rainy season went on longer in 2007. Also, typhoons struck the country on two consecutive holidays.

Added to these woes, gasoline prices are "soaring." At the same time, Japan has eliminated a popular tax cut, the fixed rate tax reduction.

Mitsubishi was also skeptical when looking at the consumer sentiment survey from July 2007. The report took note of a trend of "steadily worsening" consumer sentiment. The report noted that consumers were wary of any possible increase in personal income, and Mitsubishi said that consumer feelings about the employment situation "are becoming harsh."

One of the reasons for the gloom in regard to the employment picture was the elimination of special wage bonuses. The transportation sector was especially hard hit by this. And government workers also suffered cutbacks in special bonuses.

Retiring baby boomers, a shift to part time work, employees moving from high paying jobs to low paying jobs, and wages cuts for local government workers, also put downward pressure on wages. "These structural factors will restrain wages for the future as well," said the report.

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Publication:Market Asia Pacific
Date:Nov 1, 2007
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