Japan consumer mood worsens to six-month low in July

TOKYO Japanese consumer confidence worsened sharply to hit a six-month low in July, a government survey showed, a sign households were feeling the pinch from rising food prices and tame wage growth.

A separate survey on service workers catering to consumers, such as taxi drivers and restaurant staff, saw they were upbeat on current business conditions but pessimistic on the outlook.

The survey findings casts doubt on the Bank of Japan's view that private consumption will emerge from the doldrums and help the economy rebound from an expected contraction in April-June.

But the central bank put on a brave face and held to its assessment that the economy is on track for a moderate recovery.

"Private consumption will remain resilient as job and income conditions improve steadily," the BOJ said in a monthly report for July published on Monday.

An index gauging household sentiment, which includes views of incomes and jobs, fell 1.4 points from the previous month to stand at 40.3 in July, a Cabinet Office survey showed on Monday. It was the lowest reading since January.

The Cabinet Office downgraded its assessment of consumer confidence to say it is "stalling."

The survey also found that 87.7 percent of the respondents expect consumer prices to rise a year ahead, up from 87.3 percent in June.

A separate government poll on service sector workers, called the "economy watchers" survey for its proximity to retail trends, underlined the fragile state of recovery.

The service-sector sentiment index rose to 51.6 in July, up for the first time in three months, but the outlook index that indicates confidence in future conditions dropped to 51.9 from 53.5 the previous month.

"Household income isn't rising much in regional Japan even as food prices continue to rise. Consumers are keen to buy goods on discounts," a retailer in western Japan told the survey.

(Additional reporting by Izumi Nakagawa; Editing by Simon Cameron-Moore and Eric Meijer)