Japan’s consumer confidence drops most since Covid-19

[TOKYO] Sentiment among Japan’s households deteriorated by the most since the early stages of the Covid-19 pandemic, following the outbreak of the war in Iran.

Confidence among multi-person households declined to 33.3 in March from a revised 39.7 in the biggest drop since April 2020, said a Cabinet Office report on Thursday (Apr 9).

The ratio of those expecting to see inflation a year from now jumped to 93.1 per cent – the highest since September, it showed.

The latest data suggests that the escalating tensions in the Middle East have already weighed heavily on Japan’s consumers, raising the risk that softening sentiment could lead to a decline in consumer spending.

Elevated oil prices may hit the economy hard, as Japan relies on imports of natural resources from the region.

The impact will increase if a prolonged period occurs before maritime traffic in the Strait of Hormuz is restored to normal.

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In the middle of March, Japan’s petrol prices hit the highest in three decades before coming down a little, the drop due to government subsidies.

A separate Cabinet Office report on Wednesday showed that the outlook of merchants also plummeted to the lowest since December 2020. BLOOMBERG