Japan's Inflationary Expectations Fall From Record

By Toru Fujioka

Oct. 1 (Bloomberg) -- Japanese consumer inflationary expectations fell from a record as energy costs dropped, a central bank survey showed.

Some 81.2 percent of consumers surveyed from Aug. 14 to Sept. 8 said they expect prices to climb this year, the Bank of Japan said in a quarterly report today, down from a record 88.9 percent in July.

Lower inflation expectations aren't likely to translate into higher consumer spending because falling wages and a worsening job market are eroding confidence. Households pared spending at the fastest pace in two years in August as inflation held at a decade high.

``Stalled wage growth and high inflation will remain a drag on consumer spending,'' Teizo Taya, an adviser to Daiwa Institute of Research and a former Bank of Japan board member, said on Bloomberg Television today. ``Japan needs to wait for overseas demand to pick up as domestic demand is too weak to trigger the recovery.''

Japan's largest manufacturers turned pessimistic about their prospects for the first time in five years as the deepening U.S. financial crisis stifled demand in the country's export markets, the central bank's Tankan showed today.

Moderating price expectations ``probably don't mean consumers think prices will ease,'' said Masanobu Ishii, director of the public relations department at the bank. ``It may just mean consumers think prices can't go up much more.''

Consumers said they thought the prices of goods they purchase on a regular basis surged 12.4 percent in the past year, more than five times the inflation rate. Core consumer prices, which exclude fresh food, climbed 2.4 percent in August.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net