Another indicator that all is not well in Japan was released today. The seasonally unadjusted diffusion index of consumer confidence for a two or more person household was 42.8% in October, compared with 44.1% in September and 48.2% in October, 2006. A value below 50% means that the majority of the participants in the survey have a negative view of the outlook. While the decline in October is significant, it should be noted that since June, 1982, when the series began, there have been few times when the level of the index was above 50% as can be seen in the first chart. Japanese consumers have not been particularly optimistic over the past twenty-five years. Monthly data for confidence are available only since December 2004.

The index is based on the average of four sentiment indexes: Overall Livelihood, Income Growth, Employment and Willingness to Buy. The year to year changes in each of these indexes are shown in the second chart. As shown there, the year to year changes have been declining from their early 2006 peak and, since early 2007, have become negative. The declines in the Employment and Willingness to Buy indexes have been particularly sharp.