TOKYO (MNI) - Japan's consumer confidence index posted the second consecutive monthly gain, rising to 39.8 in February from 39.0 in January, as fears of job and wage cuts continued to ease and more people were still willing to buy durable goods, the Cabinet Office said Monday.

This prompted the Cabinet Office to upgrade its assessment, saying: "Consumer confidence is nearly flat."

Last month when the government reported January data, it repeated its view that "consumer confidence shows weakness," after downgrading it in the previous month.

The index showed the second straight monthly decline in December last year after posting its first drop in 11 months in November.

In February, all four sub-indexes for consumer confidence -- indicating overall economic well-being, income growth, employment and willingness to buy durable goods -- posted month-on-month gains.

From a year earlier, the overall index rose 13.1 points in February, marking the 10th consecutive year-on-year rise, after rising 12.6 points in January.

The index showing sentiment on asset values, which is not included in the overall consumer confidence index, fell 0.3 points to 37.8 in February, posting the first month-on-month drop in two months after rising 2.9 points to 38.1 in January, as stock markets were weak and the yen rose against the dollar in the month.

Among consumer confidence index components, the sub-index for sentiment on overall livelihood rose to 40.7 in February from 39.8 in January, up for two months in a row.

The index rose 11.3 points from a year before, posting the 11th consecutive y/y gain after rising 10.6 points in January.

The income growth sub-index climbed to 38.8 in February from 37.9 in January, posting the second consecutive m/m gain and rising to the highest level since 38.9 marked in February 2008. It rose 7.7 points from a year earlier, up for the eighth straight month.

The employment conditions sub-index rose to 34.2 from 33.1, the second consecutive m/m rise, after rising 2.3 points in January. It jumped 19.3 points from a year before, the eighth consecutive y/y gain.

The sub-index for willingness to buy durable goods edged up to 45.4 in February from 45.3 in the previous month, up for the third straight month. From a year earlier, it rose 14.0 points, showing the 11th straight y/y rise.

Until September 2009, the overall index had been recovering steadily from the record low of 26.2 hit in December 2008. It was unchanged at 40.5 in October 2009, remaining at the highest level since 42.8 in October 2007, but there were already signs that confidence had started to erode.

The index reached its most recent peak of 48.4 in February 2007, but had trended downward till December 2008.

The latest survey was conducted on Feb. 15, covering 6,720 households, of which 5,031 responded.

The consumer confidence index is based on replies to a survey asking about four aspects of consumer sentiment: the perception of overall livelihood, income growth, employment conditions, and the willingness to purchase durable goods.

Respondents are asked if they see improvement, deterioration, or no change in these areas over the coming six months.

The survey also showed that the recent downward bias in consumer inflation expectations eased in February as the ratio of people expecting lower prices in a year's time fell for the second consecutive month, falling to 23.5% from 27.2%, while that for people foreseeing higher prices gained for the second straight month, rising to 31.1 from 29.9.

The ratio of people who projected unchanged prices rose to 36.2% in February from 33.2% in January, also up for two months in a row.

The number of people foreseeing higher prices ahead rose for the first time in 11 months in June 2009 and then dipped in July before rising briefly in August. It fell for four straight months through December 2009.

Of those surveyed in February, 23.5% said they expected prices to drop in a year from now, down from the record high of 31.9% hit in December 2009. Of them, 15.0% projected a price drop of less than 2%.

The record low for those expecting price drops was 2.4% marked in July 2008, when crude oil prices hit all-time highs.

Of all the respondents, 31.1% said they expected prices to rise in a year's time, up slightly from 29.9% in January and the record low of 29.2% marked in December 2009.

Those projecting inflation at or above 5% stood at 3.4% in February, unchanged from the previous month, while those expecting inflation lower than 2% accounted for 17.4%, up from 15.9%.

The survey showed that 10.3% of those polled forecast an annual inflation rate between 2% and 5% in a year's time, down from 10.8% in the previous month.

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