Business confidence among workers sensitive to economic trends fell in August for the first time in four months as prolonged rain and typhoons discouraged consumers from spending.
The diffusion index of responses to the government's survey of "economy watchers" such as taxi drivers and restaurant workers fell 3.9 points from the previous month to 47.4, the first fall since April and a drop back below the threshold of 50 after just a month, showing that the economy halted its recovery from the consumption tax hike on April 1.
The government kept its assessment of the survey unchanged, however, saying it suggests the economy is "moderately recovering" and the negative reaction to a rush in demand ahead of the 3-percentage-point tax increase is beginning to wane.
It added, though, that weather negatively affected the figure in August as torrential rain hit parts of western Japan.
Downpours in the city of Hiroshima caused mudslides that killed 72 and left two unaccounted for. "Continuous heavy rain from the beginning of the month and the mudslides hit us during the final sale of the summer," a department store official in western Japan commented in the survey.
The diffusion index shows whether respondents believe economic conditions have improved or worsened over the past three months. A reading of 50 indicates that those polled generally feel economic conditions are flat.
The index for the economic outlook for the next few months fell 1.1 points to 50.4 as some respondents remained wary of rises in fuel costs, the government said, reflecting the weakness of the yen as well as geopolitical turmoil in Iraq and Ukraine.
The Cabinet Office surveyed 2,050 workers across Japan from Aug. 25 to 31, of whom 1,860, or 90.7 percent, responded.