Business sentiment among workers with jobs sensitive to economic trends fell to the lowest level in more than three years in July amid sluggish consumer spending due to bad weather, government data showed Thursday.
The diffusion index of confidence among "economy watchers" such as taxi drivers and restaurant staff dropped 2.8 points from June to 41.2, the lowest since April 2016, the Cabinet Office said. It fell for the third consecutive month and also marked the sharpest fall since January last year.
A reading below 50 indicates that more respondents reported worsening rather than improving conditions over the past three months.
The office downgraded its assessment for the first time in four months, saying, "Weak developments have been seen in the economy's recovery, given some temporary downside factors including weather." In the previous month, it only said the economy "has shown some weakness in its recovery."
A convenience store clerk in the Kanto region said sales of items such as ice cream and cold beverages decreased 20 to 30 percent due to a relatively longer rainy season and lower temperatures for summer.
Looking ahead, the diffusion index gauging the economic outlook in the coming months was down 1.5 points to 44.3 amid concerns over deteriorating relations between Japan and South Korea over trade and wartime history as well as the planned consumption tax hike in October.
A supermarket employee in the region of Kyushu expects sales to slow after the tax hike, while a worker at a tourist spot in Chugoku said the number of South Korean visitors is likely to decline.
The Cabinet Office polled 2,050 workers from July 25 to 31, of whom 1,856, or 90.5 percent responded.