Sentiment among so-called economy watchers, including taxi drivers and shop clerks, deteriorated in June for the third straight month, the Cabinet Office said.
The deterioration reflected wild swings in stock prices and foreign exchange rates, as well as cost increases due to the weaker yen, according to the latest survey of people on the economic front line.
The diffusion index gauging the survey respondents’ sentiment on current economic conditions compared with three months before stood at 53.0, down 2.7 points from the previous month.
The Cabinet Office lowered its assessment for the first time since October 2012, saying the pace of the economic recovery is slowing.
Still, officials said the recovery trend continues as the index exceeded the boom-or-bust dividing line of 50 for the fifth consecutive month.
Sentiment deteriorated in all sectors affecting households, businesses and employment.
By region, sentiment worsened in all regions except Hokkaido, where tourism demand was strong.
An official at an electric machinery manufacturer in the Chugoku region said raw materials costs are expected to rise due to the yen’s weakening and doubted whether this can be offset by higher sales.
An official at an accounting firm in the Tokai region expressed concerns about wild swings in foreign exchange rates and stock prices and said a wait-and-see mood is growing on corporate capital expenditures.
By contrast, some economy watchers showed positive views on the economy.
An official of a department store in the Kinki region said sales of luxury products costing more than ¥10 million were strong.
Both overseas and domestic orders are coming in, an official at a general machinery maker in the Hokuriku region said.
The Cabinet Office also said the diffusion index for the watchers’ economic outlook two to three months ahead dropped 2.6 points to 53.6, down for the second straight month.