TOKYO: Consumer confidence levels have fallen to a six-month low in Japan, as the financial crisis continues to exert an impact on popular sentiment in the country.

The monthly index of the views of "general households", or homes with two or more residents, compiled by the Cabinet Office fell to 37.6 points in December, from 39.5 points in November.

Furthermore, nearly a third of consumers expected prices to decline over the next 12 months, while 29% thought the opposite, the first time this balance has tilted in favour of the former point of view since April 2004.

Salaries in the Asian country have declined for 18 months in a row according to the Japan Business Federation, while pessimism regarding the employment market is equally widespread.

Seven & I Holdings, the convenience store group, recently reported that its profits over the last nine months have tumbled by 32% as shoppers reined in their expenditure.

In response, the company, which operates chains including 7-Eleven in the Asian nation, is set to launch a range of low cost, own-label goods.

The Japanese government is also currently attempting to pass a stimulus package, valued at ¥7.4 trillion ($82bn; €56.8bn; £49.6bn), which it hopes will push GDP up by 0.3%, and build on previous such efforts.

More positively, Julian Jessop, chief international economist at Capital Economics, has predicted that consumer spending in Japan will rise by 1.8% in 2010, partly as a result of this kind of intervention.

"The purpose of the fiscal stimulus was to kick-start the economy and to stabilise the labor market. In that sense, it succeeded," he said.

"We're forecasting that consumer spending recovers its losses from the last two years."

Data sourced from Bloomberg; additional content by Warc staff