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Friday 11th of February 2011
February 9, 2011    

Japanese consumer confidence up in January

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by Kay Murchie

Japanese consumer confidence grew for the first time in seven months in January, the Cabinet Office said today.

The closely-watched consumer sentiment index climbed to 41.1 in January, from 40.1 in December.

The figures suggest consumers are now more optimistic about the economic prospects after all four sub-indices of the sentiment index saw an improvement in January.

The employment index gained 2.2 points to 38.6, while consumers’ perception on their overall livelihood climbed 0.5 points to 42.7.

The figures come just a week after the Bank of Japan said the economy was improving.

However, the economy continues to battle with deflation. Last month, official figures revealed Japanese core consumer prices fell 0.5% in December compared with a year ago – representing the 22nd consecutive monthly decline that the economy has been in deflation.

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, Standard & Poor’s (S&P) recently cut Japan’s credit rating from AA to AA-, the first time in nine years such measures have been taken.

The credit rating agency cited the country’s mounting debt worries for the downgrade.
Japan’s debt currently stands at almost twice the country’s annual economic output – this compares with 136.8% for Greece and 112.7%.

Japanese debt is the highest of any industrialised nation.

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