REPEAT: MNI Survey: Japan Sentiment Rise Masks Policy Concerns

Repeats Story Initially Transmitted at 07:41 GMT Nov 9/02:41 EST Nov 9

By Max Sato

     TOKYO (MNI) - Japanese consumer and business sentiment overcame the drags

from two typhoons and the snap election last month but concerns remain about the

negative effect of the weak yen and the government's slow progress in enacting

labor market reforms.

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

rose to a more than three-year high of 52.2 in October from 51.3 in September on

a seasonally adjusted basis, the Cabinet Office said Thursday.

     Typhoons hit many parts of the country for two weekends in a row last

month, hurting sales at retail stores and restaurants, but solid demand for

business investment and rising job offers pushed up the overall sentiment index.

     "Despite the bad weather, there was some support from spending by wealthy

consumers due to higher stock prices and the yen's fall as well as demand for

autumn and winter clothing given lower temperatures," Cabinet Office director of

regional economies Shigeru Hirota told reporters.

     The Economy Watchers outlook index showed sentiment about the situation in

two to three months rebounded in October, rising to a nearly four-year high of

54.9, up a sharp 3.9 points from 51.0 in September.

     Many of those surveyed predicted business should pick up after the negative

impact of bad weather and the Lower House election on Oct. 22. People were

mobilized to help election campaigns and firms canceled leisure trips for

employees before the election, as feared earlier.

     The Cabinet Office maintained its overall economic assessment in October

after upgrading it for the first time since the May report, saying, "The economy

is picking up steadily."

     "Looking ahead, there are expectations for continued business investment,

although there are concerns over labor shortages and overseas developments," the

government said, maintaining its recent outlook.

     Looking at the survey details, however, some Watchers reported flat

business conditions and uncertainty over the outlook.

     While some, including exporters, are benefiting from stock market gains and

the generally weak yen promoted by the government of Prime Minister Shinzo Abe,

others question whether his reflation policy mix of large-scale monetary easing,

increased fiscal spending and planned structural reforms is actually improving

the livelihoods of average consumers and boosting firms that rely on domestic

demand.

     "Exports of automobiles and smartphone parts are growing due to the

depreciation of the yen, bringing in foreign reserves," said a supermarket owner

in the Tokai region, central Japan, where Toyota Motor is based.

     "But Domestic demand is not growing so much. Many of our customers work in

the service industry where business is not improving as much as generally

conceived. Lower temperatures since mid-October are supporting sales of winter

goods but overall salaries for people working for small businesses are not

increasing."

     Government data released Tuesday showed that total monthly average cash

earnings per regular employee in Japan rose 0.9% on year to Y267,427 in

September, posting the second straight year-on-year rise, but continued to mark

a slight drop from a year before after adjusted for inflation in the face of the

recent rise in the cost of living.

     The weak yen makes imports more costly, with mark-ups for basic materials

and processed food, while keeping energy prices high.

     "Consumers are expected to tighten their purse strings because food prices

are rising, the weak yen is pushing up the prices for heating oil, a necessity

in the winter, and there is uncertainty over wage growth," said a judicial

scrivener in Hokkaido, the northern most province.

     Some Watchers believe that some media are hyping the effects of Prime

Minister Abe's economic policies and  the current economic recovery, whose

current duration has reportedly surpassed the second-longest post-war stretch.

     "Statistics show Japan's business expansion is continuing but since we have

not overcome deflation, it is hard to raise prices and our firm cannot move out

of the profit downtrend," said a restaurant owner in southern Kanto Plain where

Tokyo is located.

     The government wage data also shows that working hours are flat to falling

from a year earlier.

     "You might want to link this to the result of the campaign to improve the

work-life balance but it does not seem to be having much of an evident impact on

working hours in our statistics," an official at the Ministry of Health, Labour

and Welfare told MNI.

     Some firms are reducing operating hours and raising efficiency by

introducing new equipment to cope with a tight labor supply, resulting in

shorter working hours for workers.

     "The downside of the (efficiency) phenomenon is some people are seeing

their income drop as their overtime working hours decline," said the ministry

official.

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

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com