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Economy in Brief

Economy Watchers in Japan Are More Confident about Current Conditions but Less Confident about the Outlook
by Louise Curley April 9 2007

The results of the latest survey of Economy Watchers in Japan are lackluster. After losing confidence in both current conditions and the outlook since early last year, the Economy Watchers have increased their confidence regarding current conditions. The diffusion indexes for current conditions for households and corporations rose in February and March of this year, that for employment fell in February, but rose to its January level in March, as can be seen in the first chart.

The loss in confidence about the future outlook since early 2006 has been less pronounced than that of current conditions, but the diffusion indexes for future conditions in households and corporations have continued to decline in March of this year while that for employment rose, as can be seen in the second chart.

The Economy Watchers currently number 2050 individuals who are in a position to observe developments that reflect economic activity in their particular fields of business. A diffusion index is calculated on the basis of the judgment of these individuals. That proportion of the individuals who see things better is assigned a weight of l; that proportion seeing things rather better, a weight of .75; that proportion seeing no change, a weight of .50; that proportion seeing things rather worse, .25; and that portion seeing things worse, a weight of 0. An index above 50% indicates that there are more optimists than pessimists.The Economy Watchers Index for Households can be thought of as the opinion of the suppliers of household goods whereas a consumer confidence index is based on the opinions of the actual consumer. In the third chart we compare the Economy Watchers Index for Household current conditions and the Consumer Confidence Index of 2 person Households. While the suppliers tend to be more volatile in their opinions, confidence on the part of both consumers and suppliers has shown little enthusiasm over the past few years.

 (Diffusion Indexes)
Mar 06 Feb 06 Mar 05 M/M Dif Y/Y Dif 2006 2005 2004
Current Conditions
Total 50.8 49.2 57.3 1.6 -6.5 51.4 49.0 50.0
Households 49.3 47.9 56.0 2.0 -6.1 49.8 49.0 47.8
Corporations 50.9 49.8 57.5 1.1 -6.6 51.8 50.5 51.6
Employment 55.9 .56.3 65.5 0.4 -9.2 60.2 57.7 61.7
Future Conditions
Total 51.3 52.1 56.2 -0.8 -4.9 52.9 51.5 51.4
Households 51.6 52.3 56.2 -0.7 -4.6 52.5 50.9 50.4
Corporations 47.9 49.6 54.0 -1.7 -6.1 51.7 50.6 50.6
Employment 56.6 55.9 56.6 0.7 -4.7 58.4 56.9 59.8
Consumer Confidence (2 Person HH)
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