Consumer Confidence in Japan | Everything You Need to Know | So Good News


A young woman chooses cosmetics at a store in Osaka, Japan.
Will Japanese consumer confidence continue to decline in the wake of Covid-19? – Image: Shutterstock; Milkovasa

After the expansion of 2021, Consumer confidence in Japan has returned to epidemic levels, and following a path that seems close to the Great Recession of 2008.

With the economy slowing in the last quarter, and inflation in the unknown, confidence may be hard to come by among the Japanese public.

What is consumer confidence and how is it measured in Japan?

Consumer confidence is an indicator of economic confidence among its citizens. It is an important indicator of financial health. Confidence among consumers is a future guide to their spending and saving intentions, which can affect Gross Domestic Product (GDP).

Several factors affect consumer confidence. Inflation can undermine confidence. It adds value to consumers, hitting their income. Higher interest rates increase the repayment of loans and mortgages.

Indeed, falling housing prices can seriously undermine consumer confidence, as housing is the main asset of a large segment of the population. A recession damages consumer confidence in part because of a recession, while a concurrent rise in unemployment can have a positive effect on consumer confidence.

On the other hand, rising wages and incomes, lower inflation and lower interest rates are expected to boost consumer confidence.

There are several measures of consumer confidence in Japan, including a survey published by the country’s Prime Minister’s Office, which is conducted monthly and the last of which surveys 8,400 households.

The measure, which is an index, consists of four areas of confidence: lifetime, income growth, employment, and willingness to buy sustainable products.

Meanwhile, the management consulting firm McKinsey publishes its research with reliable data on Japanese consumers.

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Historical data on consumer confidence in Japan

Consumer confidence in Japan has experienced a rollercoaster ride over the past two years, led by the Covid-19 pandemic.

The government’s response was the lowest since it began in 1982 when the outbreak began, as a massive lockdown to stop the spread of the virus left consumers in the dark. The seasonally adjusted index fell to 22.1, after reading 39 earlier in the year.

The government’s strong stimulus to support families, workers and businesses brought much-needed hope to consumers when the brand returned in 2020, but this was hampered by the slow release of the Covid-19 vaccine and new closures to contain new outbreaks.

In Japan's Consumer confidence index

Confidence began to see a further downward trend until 2021, when conditions began to improve and consumers were encouraged by savings and easing restrictions.

Difficult conditions though have seen the indicator begin to decline again this year, with the number of consumers in Japan falling by 18% this year, to 29.9 in October 2022.

The latest reading showed that all four measures of confidence were below last month’s levels, and overall life expectancy fell by 1.7 points.

What drives consumer confidence in Japan?

Inflation, while lower than double-digit figures in other economies, is at its highest level in decades in Japan.

The latest reading of 2.8% – 3.1% for core inflation – in September marked the country’s 31-year high.

The economists interviewed are Reutersas of November 11, they expect the measure to reach a ten-year rate of 3.5% when the October figures are released.

Meanwhile, McKinsey wrote in its update last month based on consumer surveys in August:

“Increasing prices, and the long-term impact of COVID-19 are increasing the intention of Japanese consumers to be frugal, especially in the categories they choose. As consumers return to normal, digital activities are expanding and starting to enter the lives of consumers in the wake of COVID-19.”

Japan-based bank Mizuho wrote in September that it expects Japan’s food supply “to pick up again in late 2022, after the impact of the Covid-19 pandemic subsides, and the demand for foreign tourists recovers.” The bank added that:

On the other hand, the loss of trade in Japan and the economic slowdown in foreign countries will affect the profits of the companies, and will lead to the return of wages.

“Inflation will remain in negative territory, and inflation in Japan is expected to return to 0% in the second half of 2023, when inflation will stop.”

Japan’s consumer confidence may have taken a hit in November as the economy unexpectedly contracted for the first time in a year, with GDP down 0.3% in the third quarter of 2022.

“Although the rise in tourist arrivals will look good in October-December and beyond, we see risks from rising prices and fears of further expansion,” Takeshi Minami, an economist at the Norinchukin Research Institute, said. Reuters in response to the results.

The strength of the Japanese currency, the yen (JPY), also affects consumer sentiment about the Japanese economy. A weak currency increases the cost of imported goods, and often weakens the power of consumers. It was also partly due to the recent drop in GDP in Japan.

In this sense, the yen has been fighting a well-known weakness this year, sinking more than 19% against the greenback this year (JPY / USD). The US Federal Reserve’s (Fed) plan to weaken the yen this year.

USD/JPY exchange rate

The yen has managed to gain against the dollar as inflation eases against expectations of an increase in noise that the Fed will begin to put the brakes on its hike in interest rates, with the currency jumping nearly 6% this month.

“Looking ahead, the Fed will continue to raise rates and the Bank of Japan will maintain its monetary policy for the time being,” Japanese bank MUFG wrote. They added:

“For the time being, although the yen’s depreciation will gradually decrease as the above-mentioned abnormal factors fade, it is unlikely that there will be a significant appreciation of the yen due to the Japanese structure.”

Japanese consumer expectations

Although there is no direct forecast for the Japanese consumer, there is an idea of ​​the factors that drive them, which are factors such as GDP, employment and inflation.

Mizuho Group expects Japan’s GDP growth next year to hit 1.8%, slightly below expectations published in April due to rising commodity prices.

Meanwhile, Mizuho said unemployment could drop to 2.3% by 2024, while the CPI is also expected to return to zero, all signs that could indicate a strengthening of consumer confidence.

The Bank of Japan also lowered its forecasts for key economic indicators in late October, expecting GDP to grow between 1.5% and 2% in 2023, and forecasting CPI to be between 1.5% and 1.8%.

Final thoughts

Note that experts’ views on Japan’s consumer confidence and the country’s economy may be wrong. Always do your due diligence before trading, checking for the latest news, reviews, critical analysis and expertise. Don’t resell money you can’t afford to lose.


Is consumer confidence high or low in Japan?

Consumer confidence is currently at its lowest level since the pandemic, and may be on track for its lowest level since the Great Recession.

What is consumer confidence in Japan?

Consumer confidence in Japan was at 29.9 in October 2022, returning to levels seen in 2020.

Is Japanese consumer confidence rising?

Consumer confidence is falling amid rising inflation and a worsening economy.

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