Consumer Confidence Advances as Households Shrug Off Europe Debt Concerns

Japan’s household sentiment rose to the highest level since October 2007, even as Europe’s debt woes roiled markets across the globe.

The confidence index climbed to 42.8 last month from 42 in April, the Cabinet Office said today in Tokyo. The median forecast of six economists was for sentiment to be unchanged.

The world’s second-largest economy expanded at an annual 5 percent pace last quarter, extending its export-fueled rebound from its worst postwar recession, a revised report showed today. So far, Europe’s turmoil has yet to damp growth in Japan, according to economist Tatsushi Shikano.

“The dominant view was that jobs and incomes would not improve for a long time, but we are seeing signs of a rebound from very low levels,” Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, said before the report. “Unless there is further deterioration in stocks, we’ll continue to see improvements” in sentiment, he said.

The Nikkei 225 Stock Average has slid 14 percent since the start of May on concern Europe’s debt crisis will temper the global economic recovery. Sentiment among merchants declined for the first time in six months in May, a report this week showed, an indication that Europe’s credit woes are cooling confidence.

The unemployment rate rose to a four-month high in April and job prospects for applicants worsened. Still, workers’ paychecks grew for a second month in April as employers had people work more hours to keep up with increasing demand.

To contact the reporter on this story: Aki Ito in Tokyo at aito16@bloomberg.net

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