REPEAT: DATA ANALYSIS: Japan Sentiment Down As Drivers Wane

Repeats Story Initially Transmitted at 06:56 GMT Jan 12/01:56 EST Jan 12

By Max Sato

     TOKYO (MNI) - Japanese consumer and business sentiment for December slipped

in what officials called a temporary break from recent sharp gains driven by

brisk spending by visitors from overseas and domestic purchases of high-end

goods.

     The general uptrend in the stock markets, combined with improving

employment and income conditions, has supported confidence in surveys by the

government and the central bank, but those surveys also indicate worsening labor

shortages are threatening to weigh on some businesses.

     The Economy Watchers' sentiment index for Japan's current economic climate

posted the first month-on-month drop in five months in December, falling by a

modest 0.2 point to 53.9 from 54.1 in November on a seasonally adjusted basis,

the Cabinet Office said Friday.

     --SENTIMENT LEVELS HIGH

     Shigeru Hirota, Cabinet Office director of regional economies, noted that

the level of the index remains high and the December result was nearly flat.

November's 54.1 was the highest in more than three years.

     The Economy Watchers outlook index showed sentiment about the situatio two

to three months ahead marked the second straight month-on-month decline, down

0.7 point at 52.7 in December after slumping 1.1 points to 53.4 in November.

     The weather was relatively stable with low temperatures in December, after

bad weather hurt some businesses in October, with demand for electric appliances

solid.

     --SLOWDOWN IN SPENDING

     "On the other hand, department stores reported that demand for high-end

goods and inbound spending, while firm, is slowing down," Hirota told reporters.

"They are also concerned that it will slow down further. It is an area we have

to watch for."

     December department store sales data won't be available until Jan. 23 but

those Watchers comments followed upbeat November sales data that showed wealthy

consumers and visitors from overseas continued to buy high-end goods and that

this trend appeared to have spread to middle-income consumers.

     The Watchers Survey also showed that supermarkets feared rising fresh food

and heating oil prices would dampen consumption.

     --LABOR SHORTAGES DRAG

     In the corporate sector, the survey showed, companies were hit by rising

material and labor costs. Transport firms are struggling to secure drivers and

some manufacturers find it hard to ship parts and products on time due to labor

shortages.

     Sentiment on employment in the Watchers Survey slipped in both the current

and outlook Watchers indexes but Hirota said it might be a blip after steady

gains and due to people's thinking that improvement of employment conditions

would not continue forever.

     Some firms are offering full-time positions to part-time and contract

workers to secure quality employees, which is good for workers, some of whom

were barely surviving around the poverty line.

     But at the same time, the decline of registered contract workers means a

slow down in business for firms dispatching temp staff.

     The Cabinet Office maintained its overall economic assessment based on the

Economy Watchers Survey in December, saying, "The economy is picking up

gradually."

     "Looking ahead, there are expectations for orders and business investment,

although there are concerns over labor shortages and rising costs," it said,

maintaining its recent outlook.

     --NO OUTLOOK CHANGE

     The Watchers results followed the data Tuesday showing that the key index

in the Consumer Confidence Survey slipped 0.2 point to 44.7 in December from a

four-year high of 44.9 in November, but that the government does not see any

reason to change its view that confidence is picking up.

     The Bank of Japan's own consumer sentiment diffusion index for the current

climate rose by 1.6 points to -11.9 in December, posting the fourth consecutive

rise, as more people said they believed Japan's economic growth prospects were

rising, with over two thirds of people projected things would be unchanged.

     But in the BOJ's survey, too, sentiment on employment slipped. In the BOJ's

analysis, it could be based on concerns that the development of artificial

intelligence would lead to mass layoffs in the future.

     In its quarterly survey of consumer sentiment, conducted between Nov 10 and

Dec 6 and released Thursday, the BOJ said the consumer sentiment outlook index

projecting conditions a year ahead marked the first rise in two quarters,

increasing 2.5 points to -15.5 in December after falling 0.7 point to -18.0 in

September.

     These results are not without concerns, either. More than a half of those

surveyed forecast their income would be unchanged a year ahead and more people

thought their income would decline.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com