April economy watchers index down for 1st time in 6 months

Japan's key business confidence index worsened for the first time in six months in April, as bad weather put a damper on sales of spring clothing while manufacturers' profits increased with the yen weakening, the government said Friday.

The diffusion index of sentiment in the nation's current economic situation among so-called "economy watchers" fell 0.8 point from March to 56.5, the Cabinet Office said in its monthly survey.

In the previous month, the index tied the record set in March 2006 amid growing hopes for Prime Minister Shinzo Abe's economic policies pursuing drastic monetary easing and large-scale public works projects.

The government left unchanged its basic assessment of the monthly survey in April, saying the watchers suggest the economy is "picking up."

Despite fears about surges in import costs, one of the negative aspects of "Abenomics," the index for the direction of economic conditions in the coming few months climbed 0.3 point from March to 57.8, up for the first time in two months, the office said.

Behind the improvement was sprouting expectations among households that their wages, including summer bonuses, may rise as the depreciation of the yen could help shore up Japan's exports, a major engine of economic growth, it said.

A falling yen usually supports exports by making Japanese firms' products cheaper abroad and increases the value of overseas revenue in yen terms, although it also lifts import prices.

The diffusion index to gauge the current business sentiment is based on whether respondents, such as taxi drivers and hotel and restaurant employees, see economic conditions as improving or deteriorating compared with three months before.

A reading of 50 indicates that those polled generally believe economic conditions are flat.

In the reporting month, the index of economic conditions for household spending dropped 1.4 points to 55.5 and that for employment declined 0.8 point to 62.3. The index for corporate activity rose 0.6 point to 56.7.

The Cabinet Office surveyed 2,050 workers across Japan from April 25 to 30, of whom 1,856, or 90.5 percent, responded.