Japan's consumer mood up for first time in seven months

image captionConsumers are one of the most powerful drivers of the economy and their mood is key to expansion

Japanese consumers were more optimistic about their economic outlook in January, the first time the mood has improved in seven months, figures show.

According to the Cabinet Office, the consumer sentiment index was 41.1 in January, up from 40.1 in December.

Japan is the world's second-biggest economy and has been trying to accelerate growth.

Analysts said government moves to boost consumer spending may mean sentiment and growth improves in coming months.

"While incomes are weak right now, future prospects are improving," said Masamichi Adachi, senior economist for Japan at JP Morgan.

An index reading of 50 indicates there are equal numbers of optimists and pessimists.

Consumer blues

The government has been trying to stoke domestic demand and lure consumers back into spending.

It has put in place a number of subsidy plans, most recently offering consumers discounts based on the environmental credentials of the cars or household appliances and electronics they were planning to buy.

While some of those incentives have already finished, others will continue to the end of March 2011, giving a fillip to consumers.

At the same time, foreign sales of Japanese products have been helped by stronger demand.

"In general, global demand from countries like the US and China is improving. So with support from exports manufacturing activity is rebounding," said JP Morgan's Mr Adachi.

Should that continue, then companies and consumers are likely to become more optimistic about their earnings potential, job security and economic prospects, the analyst said.

Lull escape

Last week, the Bank of Japan (BOJ) added its weight behind the view that Japan's economy was improving.

Hidetoshi Kamezaki, a policymaker with the BOJ, said that he expected the economy to "escape from a lull towards spring".

The most recent figures on industrial production showed that output increased for a second straight month in December.