Forex

Given the strength of the Japanese labor markets over the course of 2007, the consumer had been widely expected to make a comeback and help to fuel expansion. However, nothing better demonstrates the exact opposite than the woeful readings of the Eco Watchers survey. This “man-in-the-street” poll of barbers, taxi drivers, and waiters is our favorite gauge of Japanese consumer sentiment because it captures the up-to-the-minute spending habits of millions of Japanese consumers. In January, the survey dropped to 31.8—its lowest reading in six years as it sank ever deeper below the 50 contraction/expansion line. The survey has since recovered to 36.9, but this is still near the lowest levels since the months following September 11, 2001. The news suggests that Japanese consumer confidence will remain low for the near future, and it does not bode well for already soft spending reports. It became clear in 2007 that businesses were not increasing wages despite the tightness of the labor markets, and with the jobless rate starting to tick up to 3.9 percent, there will be little impetus for payrolls to increase. The most recent retail trade reading shows a 1.0 percent drop in the month of February—the worst decline since June 2007—while overall household spending stagnated during the same month from a year earlier.