MONTHLY ECONOMIC REPORT(December 1999)
Recent economic trends in Japan reveal that personal consumption has not come out of a standstill, despite a slight improvement from early autumn. This is because income remains sluggish. The level of housing construction became a little lower recently as the starts of owner-occupied houses and of houses for rent have decreased, while the starts of condominiums remain strong.
Investment in plant and equipment keeps decreasing substantially as a trend.
As for public works, new starts are sluggish, although the implementation is proceeding at a pace a year ago. Exports, especially those to Asia, are increasing.
Inventory adjustment has proceeded and the inventory / shipment ratio has come down to a level lower than a year ago. Industrial production is recovering.
The employment situation remains severe, with the unemployment ratio staying at a high level, despite such movements as an increase in overtime hours worked.
Company profits have started to recover. Firms' confidence has further improved, although at a low level.
All in all, the economy has not yet got out of a severe situation, as the momentum for recovery in private demand remains weak. However, activities continue to improve moderately, through the influence of the Asian economic recovery as well as the effects of various policy measures.
The Government aims to realize a smooth baton pass, toward a full-scale recovery, from public to private demand, while wiping out concerns that future weakening in public demand, among other
things, may bring about an economic slowdown, and to establish a new solid foundation for economic development in the 21st century. From this viewpoint, the government will strongly promote the implementation of "The Policy Measures for Economic Rebirth" which was recently decided on.
2. EVALUATION OF INDIVIDUAL INDICATORS
The Japanese economy, in terms of demand, shows that personal consumption, despite a slight improvement from early autumn, has not come out of a standstill, mainly because income remains sluggish. The level of housing construction became a little lower recently as the starts of owner-occupied houses and of houses for rent have decreased, while the starts of condominiums remain strong. Investment in plant and equipment keeps decreasing substantially as a trend. As for public works, new starts are sluggish, although the implementation is proceeding at a pace of a year ago.
The real gross domestic product for July-September 1999 (preliminary report) decreased 1.0% (an annualized growth rate of 3.8%), and the domestic demand contribution was minus 1.3%.
With regard to industry, inventory adjustment has proceeded and the inventory / shipment ratio has come down to a level lower than a year ago. Industrial production is showing a trend towards recovery. Company profits have started to recover. Firms' confidence has further improved, although at a low level. The number of bankruptcies remains almost at the same level.
The employment situation remains severe, with the unemployment ratio staying at a high level, despite such movement as an increase in overtime hours worked.
Exports, especially those to Asia, are increasing. Imports are increasing moderately, with those from Asia in a rising trend. As for the balance of payments, surpluses registered in the trade and service account balance remain almost at the same level. In November, the exchange rate of the yen against the U.S. dollar (interbank spot central rate) appreciated to the 102 level late in the month after hovering between the 104 and 106 level.
Reviewing price movements, domestic wholesale prices have stopped declining and consumer prices remain stable.
Taking a look at the recent financial situation, short-term interest rates rose in November. Long-term interest rates remained at the same level in November. Stock prices rose in November. The Money supply (M2+CDs) increased 3.5% in October. Further, the feeling of stringent corporate financing has been mitigated; however, stagnancy in lending by financial institutions continues.
3. OVERSEAS ECONOMY
The U.S. economy continued to expand, although its future course is uncertain. July-September Real GDP posted an annual growth rate of 5.5% (preliminary figure) over the previous quarter, after increasing 1.9% in the second quarter. Personal spending and capital investments are increasing. Housing investment has decreased. Overall industrial production is increasing. Employment is rising. Prices are generally stable. The trade deficit for goods (on an international balance of payments basis) is still at a high level. On November 16, the Federal Reserve Board raised the official discount rate by 0.25 percentage point to 5.00% and the targeted federal funds rate by 0.25 percentage point to 5.50%, and also shifted its monetary policy stance from "tightening" to "neutral." Long-term interest rates (30-year Treasury bonds) declined in the first half of November but rose in the second half, ending the month slightly higher. Stock prices (Dow Jones industrial average) rose in the middle of November but lost some ground later on.
In Western Europe, the German economy is improving gradually, while the French economy is expanding, and the British economy is improving. Industrial production is moving sideways in Germany but rising in France and Britain. The unemployment rate remains almost unchanged in Germany, is declining slightly in France, (although still at a high level) and remains at a low level in Britain. Prices are stable.
Turning to East Asia, the pace of economic growth is slowing in China, and prices are declining. China's exports are increasing sharply. The South Korean economy is expanding, and its unemployment rate is falling.
As for movements in the international currency market in November, the U.S. dollar (effective exchange rate) moved slightly higher.
As for movements in the international commodity market in November, the CRB commodity futures index rose to the level slightly below 207 points in the middle of the month, but later moved in a narrow range at around 203 points. The spot crude oil price (North Sea Brent) moved in an upward trend early in the month and rose above 26 dollars per barrel later in the month for the first time since the Gulf crisis.