JAPAN'S CONSUMERS SAY DEFLATION OVER.

At the end of 2004, Japan's consumers expressed more optimism about the economy based on declining unemployment. Unemployment ended the year at 4.7 percent, down from a record 5.5 percent in January, according to a mid-December Bloomberg report.

Consumer confidence was up in November 2004 the fourth month out of the past six months that confidence gained. Based on their upbeat views, consumers have been spending and helping to support Japan's economic growth. Particularly notable in spending patterns was the strong surge in Internet shopping. Consumers bought a wide variety of goods on the net. These included fashion, personal computers, home electronics, and gourmet foods. Consumers perceive items on the net as cheaper than in-store.

Internet spending has also been strong for travel and other services. One Japanese airport reported Japanese departures for overseas destinations had increased 25 percent over the first 10 months of 2004.

Rakuten, Japan's biggest online retailer, said that its online sales and auctions rose 75 percent in the third quarter. Sales totaled US$48-million.

On the subject of Japan's protracted deflation, a Government consumer survey found that more than 50 percent of respondents felt that prices would be higher in 2005. According to Bloomberg, Japan's core consumer prices (excluding fresh food) rose in only one month since April of 1998. In order to end the six-year deflation, Japan's central bank has maintained interest rates at near zero to put extra cash into circulation. Overall, consumer spending has increased for 5 quarters.