The main consumer confidence index takes a dive from 39.7 in February to 33.3 in March. And that is the weakest reading since the middle of last year. The US-Iran conflict is threatening to derail the consumer recovery in Japan, not least with higher petrol prices and spillovers to higher inflation.
And for the BOJ, it isn’t the good kind of inflation. All of this is part of cost-push inflation, which is what the central bank specifically wants to avoid. For policymakers, it is vital that price pressures are driven up by stronger wages instead.
Circling back to the report, you can see how serious the impact of the war in the Middle East is weighing on sentiment:
Looking at the breakdown of the individual components:
- Overall livelihood: 29.7 (previously 39.5)
- Income growth: 39.8 (previously 42.3)
- Employment: 37.6 (previously 46.3)
- Willingness to buy durable goods: 26.0 (previously 33.7)
It’s a fall across the board as the mood darkens for Japanese consumers.
Meanwhile, price expectations also saw a significant increase after having fallen in recent months. The percentage of households expecting prices to “go up” shot back up to 93.1% in March. That is up from 85.6% in February before this.
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