Japan's Dec. consumer confidence down with sales tax hike nearing

Japan's consumer confidence worsened in December after rising the previous month, the government said Friday, underscoring fears that a sales tax hike in April may choke the country's budding economic recovery.

The seasonally adjusted index of sentiment among households made up of two or more people fell 1.2 points from the previous month to 41.3, the Cabinet Office said. Readings below 50 indicate pessimists outnumber optimists.

The government downgraded its basic assessment of the index, saying consumer sentiment is "leveling off," while noting last month that it is "on an improving trend."

In the sentiment survey, consumers are asked about the outlook for the coming six months.

The latest result came as local media reported in the final month of the year how the 3-percentage-point consumption tax hike to 8 percent will affect the broader economy in 2014, with some experts warning the measure could hurt consumer spending and investment.

A Cabinet Office official said the index of consumer confidence also plunged before the sales tax rate was raised to 5 percent from 3 percent in April 1997.

A quarterly survey conducted by the government showed that the index of sentiment among households sharply dropped 5.5 points to 38.4 in March 1997, the official said.

In December, three of the index's four components fell, although consumers' view of employment conditions rose 0.1 point to 48.2.

Consumers' near-term readiness to buy new durable goods declined 3.1 points to 40.0. Their assessment of livelihoods decreased 1.5 points to 37.8 and that of income growth slid 0.6 point to 39.0.

The survey, meanwhile, showed that 88.4 percent of households expect consumer prices to rise in the year ahead, down 0.8 point from November.

The survey conducted on Dec. 15 covered 8,400 households and valid responses were received from 5,682 households.