— Japan Oct Watchers’ Forward-Looking Index 41.1 Vs Sep 41.4
— Japan Watchers’ Outlook Index Posts 1st Drop In 2 Months
— Japan Govt Repeats View: Econ Shows Soft Spots After Pickup

TOKYO (MNI) The Economy Watchers Survey index for current
conditions in Japan fell to 40.2 in October from 41.2 in September,
posting the third straight drop on lingering negative effects of letting
subsidies for buying fuel efficient vehicles expire in September, the
Cabinet Office said on Tuesday.

Consumer demand for cigarettes slumped after rush purchases before
the tobacco tax was hiked on Oct. 1 while lower automobile sales and
production, combined with the yen’s dampening impact on exports, hurt
business sentiment.

The October reading of 41.2 was the lowest since 38.8 marked in
January this year.

The government repeated its assessment of the sentiment from last
month, saying that the latest survey showed that “the economy has been
picking up at a moderate pace but it is now showing soft spots.”

Last month, it downgraded its view for the second straight month as
the yen’ rapid rise and the end to the auto subsidy program began to
dampen sentiment.

The headline index stood below the key 50 level — the diving line
between net positive and net negative responses to the survey — for the
43rd straight month in October.

The 1.0-point fall in October was due to more people saying things
were getting “slightly worse” or “worse” and fewer people seeing
conditions as being “better.” It followed a 3.9-point plunge in
September.

In July and April 2010, the index for current conditions hit 49.8,
the highest level in about three years since 50.8 in March 2007. Three
years ago, the Japanese economy was still in its longest post-war
expansion period that ended in October 2007.

Meanwhile, the forward-looking index, which gauges conditions two
to three months ahead, slipped back to 41.1 in October from 41.4 in
September, marking the first drop in two months, as the yen’s rise
continues to cloud overall business and job offer prospects.

The index stayed below the key 50 level for 41 months in a row.

In January 2009 the outlook index rebounded to 22.1 from a record
low of 17.6 hit in December 2008.

The watchers’ index gauges whether respondents with jobs most
sensitive to economic conditions — taxi and truck drivers, department
store sales staff and restaurant and shop owners — believe economic
conditions have improved or worsened from three months before.

The survey outcome is monitored closely by the Bank of Japan as it
appears to reflect retail sector sentiment more accurately than some
other data.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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