Japanese consumer sentiment up but fears remain for economy
The world’s no.2 economy received a boost today with the news of a rise in Japanese consumer confidence in June.
The Government said Japan’s consumer sentiment index reached its highest level since December 2007 and represents the sixth consecutive monthly rise. The index rose to 37.6, up from 35.7 in May.
However, there are still fears for the economy after the latest figures from the Bank of Japan revealed that Japanese wholesale prices tumbled 6.6% in the year to June – the fastest pace of decline since records began almost 50 years ago.
The figures have raised fears that the economy could see a short period of deflation. Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s.
A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.
Furthermore, Japan’s core consumer price index (CPI) fell 1.1% in May compared with the same month last year – the most since records began almost forty years ago.
Meanwhile, Japanese Prime Minister, Taro Aso, has finally set a date for a general election on August 30.
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