The "Consumer Sentiment Shock" in the US is Not Just a Foreign Affair for Japan—Changing Perceptions Reflected in Rising Prices, Gasoline, and Wage Concerns

Consumer sentiment in the US has sunk to historic lows.
The University of Michigan's Consumer Sentiment Index for May 2026 was 44.8, a significant drop from the previous month's 49.8, marking the lowest level since the survey began. The underlying factors include rising gasoline prices, persistently high costs of essential goods, and the fear that "prices will continue to rise."

At first glance, this news might seem like a story about the US economy. However, when compared with the situation in Japan, it's not a distant event. Rather, the "discrepancy between economic indicators and lived experiences" occurring in the US is also spreading in Japan, albeit in a different form.

In the US, while the stock market remains relatively stable, households are struggling with gasoline prices, groceries, and interest burdens. In Japan, surface-level figures like the Nikkei average, corporate performance, and wage increase rates might suggest an economic recovery. However, the perception of consumers facing supermarket bills, electricity costs, gasoline prices, housing loans, and dining expenses is not necessarily optimistic.

What Happened in the US is More of a "Crisis of Confidence" than a "Recession"

The reported deterioration in US consumer sentiment is not merely a story of "economic downturn."

There hasn't been a collapse in employment, nor have stock prices plummeted across the board. Yet, consumer confidence has fallen to historic lows. The core issue is not a traditional economic recession but the loss of trust that "life will improve."

Notably, there is a rise in inflation expectations. In the US, one-year inflation expectations have risen to 4.8%, and long-term expectations to 3.9%. This is a particularly troublesome signal for the central bank. When people start to believe that "prices will continue to rise" rather than being temporarily high, it changes corporate pricing, wage negotiations, and consumer behavior itself.

Buy before prices go up.
Companies find it easier to implement price increases.
Workers demand higher wages.
As a result, inflation becomes embedded in society rather than being a temporary shock.

The situation highlighted in the original US article precisely illustrates this precariousness.

Consumer Sentiment is Also Weak in Japan

In Japan, consumer sentiment is not particularly strong either.

According to the Cabinet Office's Consumer Confidence Survey, the consumer confidence index for April 2026 was 32.2, a 1.1-point drop from the previous month. The breakdown shows "living conditions" at 28.2, "income growth" at 39.8, and "employment environment" at 37.4. Although the survey design differs from the University of Michigan index, what is common is that households are cautious about the future.

In Japan, overcoming deflation has long been a policy goal. The problem was that prices were not rising, and the aim was to shift to an economy where both wages and prices increase. However, when prices actually start to rise, the burden felt by households is greater than imagined.

Particularly in Japan, where much of the food and energy is imported, factors such as yen depreciation, rising crude oil prices, increased logistics costs, and geopolitical risks push up living costs regardless of domestic demand strength. The structure where gasoline prices directly hit household sentiment, as seen in the US, also exists in Japan.

Gasoline Prices Also Chill Sentiment in Japan

In the US article, rising gasoline prices are depicted as a major factor in deteriorating consumer sentiment. This is a very important point for Japan as well.

In March 2026, the national average price of regular gasoline in Japan temporarily rose to 190.8 yen, reaching a record high. Subsequently, government subsidies have kept prices down, with the national average at 169.2 yen as of May 18. The gasoline subsidy amount from May 21 is set at 41.8 yen per liter, and without these subsidies, the household burden could have been significantly heavier.

Here lies a problem unique to Japan.
Even if the retail price is kept down by subsidies, consumers feel the anxiety that "it would be much higher otherwise." Concerns about how long the subsidies will last, what will happen to funding sources, and what if crude oil prices rise further, chill consumer sentiment more than the actual prices.

In rural areas where cars are essential, gasoline is not a luxury. It is necessary for commuting, shopping, medical visits, caregiving, and transporting children. When gasoline prices rise, it's not just about cutting back on drives. It also affects food and daily necessities through logistics costs, doubly squeezing rural household budgets.

In this regard, Japan's gasoline issue is very similar to that of the US.

Even if Japan's Inflation Slows, the Sense of Security Doesn't Return

According to the Ministry of Internal Affairs and Communications' Consumer Price Index, the national CPI for April 2026 rose 1.4% year-on-year, and the comprehensive index excluding fresh food also rose 1.4%. It's not a high inflation rate like in the US. Judging by the numbers alone, Japan's price increase seems to be settling.

However, the perception of consumers is not that simple.

Firstly, even if the inflation rate slows, the price level itself does not decrease. Foods, daily necessities, dining out, and utility costs that have risen so far often remain at high levels. Even if the year-on-year growth is low, from the household's perspective, it doesn't feel like "prices have become cheaper."

Secondly, policy-driven reductions in energy and education-related costs temporarily make price indicators appear lower. Even if subsidies and system changes suppress the index, if crude oil prices, yen depreciation, and import prices resurface, prices will rise again.

Thirdly, dissatisfaction with food prices is persistent. In Japanese households, the burden of food costs particularly affects sentiment. Just as gasoline prices influence politics and consumer sentiment in the US, in Japan, price tags at supermarkets, rice, vegetables, processed foods, and dining out prices influence the lived experience.

In other words, even if it's explained that "the inflation rate has settled" in Japan, the situation where it's not perceived as "life has become easier" continues.

Wage Increases are a Positive Sign, but Not Everyone Benefits

A point where Japan's situation differs from the US is that wage increases are beginning to become more apparent.

In the 2026 spring labor offensive, high wage increase rates were indicated, and the Ministry of Health, Labor and Welfare's Monthly Labor Survey also showed signs of improvement in nominal and real wages. Real wages in March 2026 were positive, indicating the possibility that wages could catch up with prices.

This is an important advancement for the Japanese economy. For Japan, which has long been stagnant with neither prices nor wages rising, continuous wage increases are a central condition for overcoming deflation.

However, there is also a gap with the lived experience here.

While wage increases are more accessible to regular employees at large companies, the benefits are less likely to reach small businesses, non-regular employees, pensioners, freelancers, and self-employed individuals. Even if the average wage increase rate is high, in reality, the gap between "those whose wages have increased" and "those whose wages have not" widens. For households, what's important is not the macro average but the difference between their paycheck and expenses.

On social media, responses such as "Even if they say wages are rising, my take-home pay hasn't increased," "It's not keeping up with price increases," and "The news of stock market highs and spring labor offensive doesn't match my lived experience" are prominent. This is similar to the US structure of "Wall Street is optimistic, but consumers are pessimistic."

The Weakness in Consumer Spending Reflects Japan's Cautious Stance

Japanese households have already become defensive.

According to the Ministry of Internal Affairs and Communications' Household Survey, the real consumption expenditure of households with two or more people decreased by 2.9% year-on-year in March 2026, marking a decline for the fourth consecutive month. Even if nominal wages begin to rise, households may not immediately open their wallets.

This is because consumers are looking at future burdens.

What will happen to electricity bills?
Will gasoline subsidies continue?
Will mortgage interest rates rise?
Will children's education costs increase?
Will retirement funds be sufficient?

With such concerns, even if income increases slightly, saving or economizing is more likely to be prioritized over consumption. In the US, even when consumer sentiment deteriorates, spending sometimes remains relatively resilient, but in Japan, where households are already inclined to save, a deterioration in sentiment is more likely to affect consumption. This could be considered more serious in Japan.

The Bank of Japan Faces Different Challenges than the US Fed

The US Fed is facing the difficult task of rising inflation expectations and deteriorating consumer sentiment. If the economy is weak, they would like to cut rates, but if inflation expectations rise, cutting rates becomes difficult.

The Bank of Japan is also in a difficult situation, albeit in a different form.

In its April 2026 meeting, the BOJ kept the policy interest rate at 0.75%. Meanwhile, market speculation about additional rate hikes is growing. If crude oil prices rise due to Middle East tensions, yen depreciation increases import costs, and corporate price pass-throughs spread, the BOJ may be forced to raise rates to curb inflation.

However, if Japan proceeds with rate hikes, it will affect mortgage loans, corporate borrowing, government debt interest payments, and the stock market. For households, not only high prices but also rising interest rates become burdensome. Especially for households with variable-rate mortgages, rate hikes could be a factor that suppresses consumption.

In the US, the central issue is "how to curb high inflation," but in Japan, the question is "how to curb import inflation without disrupting the cycle of wage and price increases that has finally begun."

What is Happening in Japan is "Delayed Inflation Anxiety"

In the US, after the post-COVID inflation phase, consumers are already highly wary of rising prices. In Japan, due to long-term acclimatization to deflation, psychological resistance to inflation is weak.

For example, food prices rise by a few dozen yen.
Dining out menus increase by 100 yen.
Gasoline rises by 10 yen per liter.
Electricity subsidies are reduced.

Even if each seems small, for Japanese households accustomed to deflationary price perceptions, it becomes a significant stressor. Transitioning to a society where price increases are "normal" is necessary from an economic theory standpoint, but it is painful for consumers.

In that sense, Japanese consumer sentiment is vulnerable for reasons different from those in the US. US consumers are reacting to the "fear of high inflation returning." Japanese consumers are responding to the anxiety of whether "their income will really keep up in an era of rising prices."

Commonalities Seen in Social Media Reactions

On US social media, reactions to the consumer sentiment index of 44.8 included comments like "The stock market is strong, but consumers are near their limits" and "It's dangerous when consumer sentiment drops amid rising inflation expectations."

In Japan, the quality of reactions is similar.
"They say the wage increase rate is high, but life hasn't gotten easier."
"Without gasoline subsidies, prices would be much higher."
"The news about stock prices and corporate profits doesn't match my supermarket experience."
"Take-home pay isn't keeping up with price increases."

These voices express consumer dissatisfaction that is not easily visible in statistics.

Of course, social media voices do not represent society as a whole. Strong dissatisfaction and anxiety are more likely to be posted. However, they are important for understanding psychology that cannot be captured by economic indicators. The deterioration of consumer sentiment manifests as everyday murmurs, reduced spending, decreased dining out frequency, and frugal behavior before it appears in statistics.

Differences Between the US and Japan

While there are many commonalities between the US and Japan, there are also differences.

In the US, the rise in inflation expectations is more pronounced, significantly impacting the Fed's monetary policy. Rising gasoline prices are more directly linked to political dissatisfaction and can easily influence elections. Even if consumer sentiment is at an all-time low, consumption itself may remain resilient for a while.

On the other hand, Japan's inflation rate itself is not as high as in the US. However, the benefits of wage increases are more likely to be uneven, with pensioners, small business employees, and car-dependent households in rural areas feeling a stronger burden. Due to the strong inclination towards saving, a deterioration in sentiment is more likely to be reflected in consumer spending in Japan.

Moreover, Japan's high dependency on energy and food imports makes it difficult to curb price increases caused by overseas factors. When yen depreciation, rising crude oil prices, and geopolitical risks coincide, prices rise even if the domestic economy is not particularly strong. This is the most difficult type of inflation for households to accept.

A Warning for Japan

The sharp decline in US consumer sentiment serves as a warning for Japan.

The first warning is that stock prices and GDP alone cannot measure consumer dissatisfaction. Even if corporate performance is good, if households are struggling, consumption will not grow. Without consumption growth, the virtuous cycle of wage increases and price pass-throughs will not be sustained.

Secondly, even if prices are kept down by subsidies, the anxiety itself does not disappear. Gasoline subsidies and electricity cost support are necessary in the short term, but to create an environment where households can consume with confidence, the spread of wage increases, the outlook for social security burdens, and future energy policies are important.

Thirdly, managing inflation expectations is crucial. In Japan, the problem has long been that prices do not rise. However, going forward, it is necessary to ensure that price increases do not lead to household distrust by accompanying them with wage and income growth. If only prices rise and wages reach only a few, consumer sentiment could rapidly cool, similar to the US.

Economic Recovery Ignoring Lived Experience Will Not Last

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