In October, Japan's service-sector workers expressed concerns over weak business and economic conditions, as reported by the Cabinet Office. The Economy Watcher's Index, which reflects the sentiments of frontline service-sector employees like barbers, taxi drivers, and workers in hotels, cafes, and retail, dropped to 47.5 in October, down from 47.8 in September. A reading above 50.0 suggests optimism, while a value below that indicates pessimism.
The index for current conditions fell even further, descending to 46.6 this October from 47.6 the previous month. The future conditions index also showed a decline, dropping to 48.0 from 49.2, based on the latest official figures. Since hitting a low during the pandemic at 55.0 in June 2023, the overall Economy Watchers Index has shown a general weakening trend.
These declining sentiments from frontline employees present a significant challenge for the Bank of Japan, which emphasizes the importance of higher real wages to encourage domestic consumption, subsequently fostering economic growth in the country. Despite the push for better wages, data reveals that Japanese workers are experiencing reduced paychecks when factoring in inflation.
Last month's figures indicated that average real wages in Japan fell by 0.1% year-on-year, as shared by the Ministry of Health, Labor and Welfare. However, the Bank of Japan has remained cautious about easing its monetary policy too drastically, with the nation’s inflation rate gauged at 2.4% year-on-year in September, surpassing the central bank's 2% target.
Each month, the Cabinet Office’s Economy Watchers Survey engages 2,050 individuals working in various service industries to gather insights..