(Provisional translation)
Monthly Economic Report
Executive Summary
( June 2009 )




(Assessment of the current state of the Japanese economy)

 While the economy is in a difficult situation, movements of picking up are seen in some areas.

* Exports are showing movements of picking up. Industrial production is picking up.
* Corporate profits are decreasing very substantially and business investment is decreasing substantially.
* The employment situation, which is worsening rapidly, is severe.
* Private consumption is weak, but some signs of nearing the bottom can be seen.

  As for short-term prospects, with worsening employment situation, the economy is likely to remain severe for the time being. However, the economy is expected to pick up as external economic conditions improve, while supported by a further reduction of adjustment pressure on inventory and the effects of the policy packages. On the other hand, there remains fear that the employment situation will worsen further due to extremely low level of production activities. Moreover, attention should be given to the risks that the economy is depressed by the influence of global financial crisis and concerns over slowdown in overseas economies.

(Policy stance)

  The government will pursue its top priority of achieving economic recovery in the near term by steadily implementing the "Policy Package to Address Economic Crisis" and other measures. The government will publish the "Basic Policies 2009", which will show the path to overcome the economic crisis, identify measures to strengthen the growth potential of the Japanese economy and alleviate public anxiety, and present fiscal management plans.
  In view of current severe domestic and external economic and financial situation, the government expects that the Bank of Japan supports the economy through appropriate and flexible monetary policy by sharing basic perspectives on macroeconomic management with the government.





Detailed explanations

1. Demand trends such as consumption and investment

Private consumption is weak, but some signs of nearing the bottom can be seen.
  Private consumption is weak, but some signs of nearing the bottom can be seen.. As for consumer confidence, a pickup has been seen, though remaining at low levels. Income is decreasing moderately. The Synthetic Consumption Index, which synthesizes demand-side statistics (Family Income and Expenditure Survey, etc.) and supply-side statistics (Indices of Industrial Producer's Shipment, etc.), increased in April in comparison to March.
  As for short-term prospects, it is expected that private consumption is supported by the effects of the policy packages while a pickup has been seen in consumer confidence. However, we should closely monitor worsened employment and income situations and the influence of Influenza A (H1N1) problem.

Business investment is decreasing substantially.
  Business investment is decreasing substantially. The Quarterly Financial Statements Statistics of Corporations by Industry, which is a demand-side statistic, shows that business investment decreased both in the October-December quarter of 2008 and the January-March quarter of 2009.
  According to the Bank of Japan short-term business sentiment survey (tankan), planned business investment in fiscal 2009 is expected to decrease for the second consecutive year for both large manufacturers and large non-manufacturers.
  As for short-term prospects, there is concern over further decrease as planned business investment is expected to decrease substantially while corporate profits decrease very substantially and uncertainty about the economic outlook, shown by factors such as downside risk of the global economy, is high.

Housing construction is decreasing substantially.
  Housing construction is decreasing substantially. Construction of owned houses is decreasing. Construction of houses for sale and houses for rent is decreasing substantially.
  As for short-term prospects, the downward trend is expected to continue for the time being due to worsened employment and income situations.

Public investmenthas shown steady undertone due to the effect of the supplementary budget for fiscal 2008.
  Public investment has shown steady undertone due to the effect of the supplementary budget for fiscal 2008.
  The amount of contracted public works and public works orders received during the January-March quarter of 2009 were higher than in 2008. The amount of contracted public works in May 2009 and the amount of public works orders received in April 2009 were higher than in 2008.
  As for short-term prospects, a strong trend is expected due to the execution of related budgets.

Exports are showing movements of picking up. Imports are decreasing moderately. The deficits of the trade and services accounts are decreasing.
  Exports are showing movements of picking up. By region, exports to Asia are picking up. Both exports to the U.S. and the EU are nearing the bottom. As for short-term prospects, it is expected that exports are continuously showing movements of picking up for the time being due to worldwide inventory adjustment progresses and production of economic stimulus measures effects by China, etc.
  Imports are decreasing moderately. By region, imports from Asia are decreasing moderately. Both imports from the U.S. and the EU are decreasing.
  As for the international balance of payments, the deficit in the trade account has been decreasing while export values have been flat and import values have decreased moderately. The deficit in the services account has been flat, thus leading the deficits of the trade and services balance to decrease.



2.Corporate activities and employment

Industrial production is picking up.
  Industrial production is picking up since exports are showing movements of picking up and downward pressure on production from inventory adjustment is decreasing.
  As for short-term prospects, production is expected to continue to pick up for the time being, reflecting further progress of inventory adjustment and pickup of exports. Also, the Survey of Production Forecast expects an increase both in May and June.

Corporate profits are decreasing very substantially. Firms' judgment on current business conditions is deteriorating very substantially. The number of bankrupt companies has been almost flat.
  According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits (excluding financial holding companies) during the January-March quarter of 2009 decreased by 70.1% in comparison with the previous year, thus posting a decline for the seventh consecutive quarter, due to the fact that the amount of sales decreased. By type of industry, profits of the manufacturing industry decreased by 141.7% and those of the non-manufacturing industry decreased by 24.0%. According to the BOJ Tankan, fiscal 2009 sales are expected to post a decrease for the second consecutive year, and fiscal 2009 current profits are expected to post a decrease for the third consecutive year.
  The BOJ Tankan shows that firms' judgment on current business conditions is deteriorating very substantially. Large manufacturers' judgment on current business conditions deteriorated for the sixth consecutive quarter, while that of large non-manufacturers deteriorated for the seventh consecutive quarter. Small manufacturers' judgment on current business conditions deteriorated for the fifth consecutive quarter; whereas that of small non-manufacturers deteriorated for the eighth consecutive quarter.
  The number of bankrupt companies has been almost flat.

The employment situation, which is worsening rapidly, is severe.
  The employment situation, which is worsening rapidly, is severe.
  The total unemployment rate, which has been increasing, has risen by 0.2% from the previous month to 5.0% in April.
  The number of new job offers has been decreasing substantially. The effective ratio of job offers to applicants has been declining substantially. The number of employees has been decreasing. Overtime hours worked in the manufacturing industry have been on a decreasing trend, but increased in April.
  As for the movement of wages, contractual cash earnings and the total amount of cash earnings are decreasing.



3.Prices and the financial market

Domestic corporate goods prices have declined moderately. Consumer prices have declined moderately.
  Domestic corporate goods prices have declined moderately.
  Consumer prices, in terms of "general, excluding fresh food, petroleum products and other specific components" (referred to as "core core"), have declined moderately. As for short-term prospects, consumer prices (core core) are expected to remain on a moderate downward trend.

As for stock prices, after rising from the 9,300 yen level to the 10,100 yen level, the Nikkei Stock Average is moving at the 10,000 yen level. The yen against the U.S. dollar is moving in the direction of depreciation from the 94 yen level to the 98 yen level.