Japan consumer mood posts record fall after quake

TOKYO, (Reuters) - Japanese consumer confidence worsened at the fastest pace on record in March, after a devastating earthquake and tsunami on the northeast coast which also triggered a nuclear crisis, suggesting private consumption will remain weak for some time.

Consumption, which accounts for about 60 percent of gross domestic product, is vital for the economy as companies are reeling from electricity shortages and damaged supply chains after the March 11 natural disaster, which took the Fukushima Daiichi nuclear power plant offline and triggered radiation releases.

Japan’s economy is likely to resume growing in the second half of this year as spending to rebuild the country’s devastated northeast takes hold, but the lingering nuclear crisis could keep sentiment weak for some time.

“Consumer spending in March and April is expected to show weakness not only because of the impact of the disaster but also because of rising oil prices,” said Yoshiki Shinke, senior economist at Dai-ichi Life Research Institute.

“Although spending will probably not deteriorate further after April, it will likely stay flat. A recovery will depend on whether the resolution of the nuclear problem goes smoothly and how power shortages pan out in the summer.”

Sentiment may also be dampened if the government ends up boosting the sales tax to pay for reconstruction after the disaster, the most expensive natural disaster ever with material damage so far estimated at $300 billion, leaving Japanese consumers footing much of the bill.

Japanese policymakers have said additional tax revenues would eventually be needed to cover reconstruction costs and a Japanese newspaper said on Tuesday that the government was considering boosting the sales tax rate to 8 percent from 5 percent. [ID:nL3E7FJ0AC]

The survey’s sentiment index for general households, which includes views on incomes and jobs , was a seasonally adjusted 38.6 in March, down from 41.2 in February. A reading below 50 suggests consumer pessimism.

The March index posted a record fall among comparable data available since April 2004 and was the lowest since June 2009, Cabinet Office data showed on Tuesday.

The government began issuing monthly seasonally adjusted data in March and using the seasonally adjusted data for its assessments.

The Cabinet Office downgraded its assessment of consumer confidence, saying it was showing weakness, compared with the previous month’s assessment that it was almost flat.

The survey also showed mounting inflation expectations, with 69.3 percent forecasting that prices would be higher a year from now, the highest since November 2008 and up sharply from 59.5 percent in the February survey.

All four categories that make up the index -- overall livelihood, income growth, employment and willingness to buy durable goods -- worsened in March.

The government did not conduct the survey in seven areas hit by the quake and tsunami that usually account for about 2 percent of the survey’s respondents.

The March 11 disaster has so far left more than 13,000 people dead and tens of thousands homeless, while disrupting global supply chains and triggering power shortages.