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REPEAT: DATA ANALYSIS: Japan Sentiment Down As Drivers Wane

MNI (London)
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
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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