REPEAT:MNI DATA ANALYSIS: Snow, Costs Hit Japan Sentiment Hard

--January Watchers Index Posts Largest Drop Since Apr 2014 Tax Hike

By Max Sato

     TOKYO (MNI) - Freezing temperatures and heavy snowfalls, combined with

rising fuel and food prices, hammered many Japanese regions, hurting sentiment

in various sectors, a key government survey released Thursday showed.

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

climate, which is closely monitored by government and central bank policymakers,

slumped 4.0 points to a six-month low of 49.9 in January on a seasonally

adjusted basis after slipping 0.2 point in December.

     It was the second straight month-on-month drop and the largest fall since

April 2014, when the index plunged a whopping 15.7 points to 38.4 after the

sales tax was raised to 8% from 5% that month, causing a prolonged slump in

consumption.

     --NO QUICK REBOUND SEEN

     "Cold temperatures are forecast to last and the prices of vegetables that

have surged are also expected to stay high. I don't think sentiment will make a

quick rebound as seen last year after we had a series of typhoons in October,"

Shigeru Hirota, Cabinet Office director of regional economies, told reporters.

     The Economy Watchers outlook index showed sentiment about the situation two

to three months ahead marked the third straight month-on-month decline, down 0.3

point at 52.4 in January after falling 0.7 point to 52.7 in December.

     The survey continued to show that companies were hit by rising raw material

and labor costs and expected the situation would remain in coining months.

     --GOVT DOWNGRADES VIEW

     The Cabinet Office slightly downgraded its overall economic assessment

based on the Economy Watchers Survey in January, saying, "Despite weather and

other factors, the gradual recovery trend continues."

     It was the first downward revision in a year. Last month, it said, "The

economy is recovering gradually."

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

although there are concerns over labor shortages and rising costs," the Cabinet

Office said, maintaining its recent outlook.

     --CONSUMER CONFIDENCE FLAT

     Last week, government data also showed that the key index in the Consumer

Confidence Survey was unchanged at 44.7 in January after slipping 0.2 point in

December.

     The Cabinet Office revised down its view, saying the pace of the pickup in

consumer sentiment has slowed.

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