Japan consumer confidence falls after quake

Japanese consumer confidence fell in March from the previous month to its lowest since June 2009 as a record earthquake, tsunami and a nuclear emergency cast a shadow over the economy. Analysts said the data bolstered the view that the March 11 disasters will force the world's third largest economy to contract this quarter amid ongoing power shortages and production shutdowns across key industries.
Many see Japan sliding into a temporary recession after the quake and tsunami devastated infrastructure and manufacturing facilities in the north-east, as the nation plunged into its worst crisis since World War II. The latest data showed Japanese consumer confidence took a hit, although analysts warned the survey was taken at the early stages of a disaster whose full impact continues to emerge.
The consumer sentiment index fell to 38.6 in March, from a seasonally adjusted 41.2 in February, Cabinet Office data showed. Readings below 50 indicate pessimism outweighing optimism. It was the lowest reading since 36.6 in June 2009, but beat some forecasts of a plunge to around 30. Although sales of water and food surged after people stockpiled immediately after the quake and the nuclear crisis at the Fukushima Daiichi plant, consumers have held off spending on areas such as entertainment and travel. Analysts warn that this mood of voluntary self restraint will exacerbate any downturn. Japan's consumer confidence has remained below its pre-financial crisis levels and retail sales slumped last year after government subsidies for car purchases were withdrawn and incentives to purchase appliances were reduced.
"The fundamental drivers of consumer spending were already weak before the earthquake struck and are likely to deteriorate further," said Capital Economics in a research note. "This bias towards austerity will not lift any time soon. For a start, the sheer scale of the human tragedy will continue to weigh on the national mood. The recent upgrading of the official assessment of the severity of the nuclear crisis is clearly a further headwind."
Last week's upgrade of the nuclear emergency at the stricken Fukushima Daiichi plant to the same level of severity as Chernobyl added to uncertainty caused by a disaster which has left nearly 28,000 dead or missing. Analysts warn Tuesday's survey was taken on the 15th March when the full extent of the disaster was still unclear.
Those surveyed did not have time to better assess the longer-term effect of the disaster on jobs, wages and industrial production, Hidehiko Fujii, chief economist at Japan Research Institute told Dow Jones Newswires. Tuesday's consumer data echoes the Cabinet Office's March economy watchers survey released earlier in April, a gauge of sentiment among the service sector which plunged the fastest in its 11 year history.
The Bank of Japan's recent Tankan survey showed Japanese business confidence in the outlook for the next three months had plunged. Japan's domestic sales of new cars, trucks and buses dropped 37 percent from a year earlier last month due to the disasters. Investors are braced for an upcoming earnings season that is expected to illustrate the initial impact of the quake on profit forecasts. Many key component manufacturers are based in the worst-hit regions of Japan, their facilities damaged by the 9.0 magnitude earthquake or inundated by the giant wave that followed.
The parts shortage has hit companies and production world-wide. Toshiba said it now expects to post an operating profit of 240 billion yen ($2.9 billion), a four percent decrease from its January forecast for 250 billion yen. It cut its revenue outlook to 6.4 trillion yen from 6.6 trillion.
The electronics giant was forced to close a small LCD panel plant and a chip-making factory in Japan's quake-hit north-eastern region, which has since partially resumed production. Toshiba is the world's second largest maker of flash memory chips used to store data in hot-selling smartphones, tablet devices and various other consumer electronics, after Samsung Electronics of South Korea.