Japan's Oct. consumer confidence down after sales tax hike decision

Japan's consumer confidence worsened in October after picking up in the preceding month, the government said Tuesday, suggesting concern is growing that a planned sales tax hike next year may weigh on the country's economy.

The seasonally adjusted index of sentiment among households made up of two or more people fell 4.2 points from the previous month to 41.2, the Cabinet Office said. Readings below 50 indicate pessimists still outnumber optimists.

The government left its basic assessment of the index intact, saying consumer confidence is "on an improving trend." But it added the index "sharply dropped in October."

The result came a few weeks after Prime Minister Shinzo Abe announced on Oct. 1 that his administration will raise Japan's consumption tax rate in April to 8 percent from the current 5 percent in April as scheduled.

Some experts had warned that the tax measure could hurt consumer spending and investment, in turn stifling the country's nascent economic recovery.

All of the index's four components went down, with consumers' view of employment conditions sliding 5.4 points to 46.3.

Consumers' near-term readiness to buy new durable goods declined 3.8 points to 43.2. Their assessment of livelihoods decreased 4.7 points to 37.7 and that of income growth fell 2.9 points to 37.7.

The survey, meanwhile, showed that 89.5 percent of households expect consumer prices to rise in the year ahead, up 1.7 points from September, given a recent surge in energy and food costs against a backdrop of the weaker yen, as well as the planned sales tax increase.

A falling yen usually lifts import prices. Japan imports around 60 percent of its food and over 90 percent of its energy resources.

The survey conducted Oct. 15 covered 8,400 households and valid responses were received from 5,940 households.