Sentiment among Japanese merchants fell to a six-year low in June as higher food and oil prices discouraged consumers from spending, the Cabinet Office said Tuesday.
The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, dropped to 29.5 from 32.1 in May. A forecast of conditions in two to three months slid from 35.1 to 32.1, the worst since September 2001.
More than half of the nation's consumers plan to pare spending this year because of rising prices, a Bank of Japan survey showed last week. The central bank lowered its assessment of consumption, which makes up more than half of the economy, in all nine areas of the country in a quarterly report Monday because of higher costs.
"Rising prices of daily necessities are a strong head wind for consumers," said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute in Tokyo. "Consumer spending might not be able to keep supporting the economy, and that's bad because foreign demand is also weakening."