Consumer Confidence on the Slide

According to Bloomberg this morning:

Japan's consumers were the most pessimistic in more than two years last month as higher taxes, falling wages and lost pension records chipped away at people's confidence in the economy. An index that measures confidence among households with two or more people dropped to 45 in June from 47.3 in May, the Cabinet Office said today in Tokyo. Sentiment was the lowest since it fell to 44 in December 2004.

Wages have fallen every month so far this year, and rising food and energy prices are eating into the cost of living.

Confidence among consumers including single-person households slumped to 45.2 from 47.4, also the lowest since December 2004. That survey has only been available since 2004.

Japan has struggled to emerge from a bout of deflation that has plagued the economy since the 1990s. Companies are gradually raising prices to reflect higher costs as the economy expands, stoking inflationary pressure, said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. in Tokyo.

Wages have failed to grow so far this year, even with unemployment at a nine-year low and companies reporting labor shortages. Average pay only rose 0.3 percent, or 10,000 yen ($82), in 2006, after sliding 10 percent in the decade before that.

Well. I think all of this just about confirms what Claus, Scott and I have been saying on this blog for some considerable time now. The big news is that maybe the mainstream discourse is now about to pick up on the underlying reality:

As Seiji Adachi, a senior economist at Deutsche Securities Inc. in Tokyo, says:

``Consumer spending probably won't become the main driver of the economy anytime soon....You can't expect consumer sentiment to rise while wages are falling and taxes and prices are increasing.''