In October, Japan's service-sector workers noted a decline in business and economic conditions, as revealed by a report from the Cabinet Office on Monday. The Economy Watcher's Index, which measures the sentiments of frontline service-sector employees including barbers, taxi drivers, and workers in hotels, cafes, and retail, fell to 47.5 in October from 47.8 in September.
A figure above 50.0 suggests optimism, while a number below indicates pessimism. Further insights show that the Economy Watcher's Index for current conditions decreased to 46.6 in October, down from 47.6 the previous month. Additionally, the index for future conditions was reported at 48.0, a decline from 49.2.
The overall Economy Watchers Index had previously seen an uplifting moment, recovering to a peak of 55.0 in June 2023 after plummeting during the pandemic. However, it has since shown a general decline. This drop in sentiment from frontline employees poses a challenge for the Bank of Japan, which has emphasized the importance of increasing real wages to boost domestic consumption, thereby fostering overall economic growth.
Unfortunately, workers in Japan are facing smaller paychecks when adjusted for inflation. In September, the average real wages saw a decrease of 0.1% year-on-year, as reported by the nation's Ministry of Health, Labor and Welfare last week. Despite these challenges, the Bank of Japan remains cautious about significantly easing monetary policy.
This is largely due to the country's inflation rate, which stands at 2.4% year-on-year as measured by the core consumer price index in September, surpassing the central bank's targeted inflation rate of 2% annually. To conduct the Economy Watchers Survey, the Cabinet Office reaches out to 2,050 service industry individuals each month..