Is Japan's Consumer Confidence Rebound Running Out Of Gas?

Consumer confidence in Japan slipped in September for the third month in a row. It is back at its level of April this year. Confidence ranks in the lower 40% of its long term range. Willingness to buy durable goods stands in the lower quartile of its range. The consumer in Japan remains wary as the yen has shot up despite government efforts to stave off the rise.

After moving up sharply from a very deep cycle low made in December of 2008 Japan's rise in consumer confidence is engaged in its second backing and filling move of this rebound cycle.

Since climbing over the 40 mark, a mark that is still below the neutral level of 50 on this index, consumer confidence has had a harder time sustaining momentum. The disorder in the world trading system and continued strength of the yen weighs heavily on export-dependent Japan. Japan still has a large domestic demand but Japan identifies so much with its ability to export when that is not going well a pall sweeps across the nation.

Japan also has a great deal of debt and with this having become an anti-debt age of sorts that weighs on Japan too, even though it owes so much of its debt to its own citizens.

The news on the trade front is the most debilitating. Japan has exchange rate issues with the US and with China, its two main trading partners. And the US and China are having a real FX spat among themselves which is also involving Europe. In the meantime the yen has been pushing to 15 year highs despite the government's best efforts to stave off that sort of strength. We have seen that the OECD leading indicators have turned sour. Japanese consumers have little to be very positive about. A new government stimulus plan is in the offing but these have not worked out well in recent years. The drop back in consumer confidence is not surprising but is still unsettling.