Cabinet Office, Government of Japan

English Home  >  Monthly Economic Report  >  Monthly Economic Report Executive Summary( November 2011 )

Monthly Economic ReportExecutive Summary( November 2011 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is still picking up slowly, while difficulties continue to prevail due to the Great East Japan Earthquake.

  • Industrial production is still picking up slowly. Exports have been flat.
  • Corporate profits have decreased. Business investment is leveling off while weak movements are seen recently.
  • Firms’ judgment on current business conditions is improving. However, small and medium-sized enterprises are cautious about the immediate future.
  • The employment situation still remains severe partly due to the earthquake disaster, although it also exhibits signs of picking up.
  • Private consumption is almost leveling off.
  • Recent price developments indicate that the Japanese economy is in a mild deflationary phase.

Concerning short-term prospects, reflecting supply chain reconstruction and the effects of policy measures, the Japanese economy is expected to continue to pick up. However, there are downside risks that could stem from several events, such as constraints of electric power supply, the consequences of the nuclear accident, further slowing down of less resilient overseas economies and volatile fluctuations in exchange rates and stock prices due to the Eurozone debt crisis, and the flood disaster in Thailand. It should also be noted that there is still a risk of the adverse effects of deflation on the economy and a concern about a possible deterioration of the employment situation.

(Policy stance)

The Government, in addition to working through the reconstruction from the Great Earthquake, swiftly implements “Comprehensive Package Responding to the Yen Appreciation” decided by the cabinet on October 21st in order to preemptively address the downside risk of the economy and the risk of hollowing-out of industry stemming from the rapid appreciation of yen.

observing the influence on the international financial and capital markets by the overseas monetary policy and financial condition, the Government expects that the Bank of Japan will support the economy by appropriate and decisive monetary policy management while working closely with the government.

The Bank of Japan decided to expand the size of the Asset Purchase Program on October 27th.

Detailed explanations

1. Demand trends such as consumption and investment

   Real GDP (gross domestic product) in the July-September quarter of 2011 increased by 1.5% on a quarterly basis (at an annual rate of 6.0%), posting positive growth for the first time in four quarters. Nominal GDP increased by 1.4% on a quarterly basis, posing positive growth for the first time in four quarters.

Private consumption is almost leveling off.

   Private consumption is almost leveling off. The consumer confidence index is picking up recently, though the pace of recovery is moderate. Real income of employees is almost flat. The Synthetic Consumption Index, which synthesizes demand-side statistics (Family Income and Expenditure Survey, etc.), and supply-side statistics (Indices of Industrial Producer’s Shipments, etc.) decreased in September in comparison to August.

   As for short-term prospects, private consumption is expected to remain almost flat. However, attention should be given to the employment and income situations, constraints on electric power supply, and so on.

Business investment is leveling off while weak movements are seen recently.

   Business investment is leveling off while weak movements are seen recently. The Quarterly Financial Statements Statistics of Corporations by Industry, demand-side statistics, show that business investment decreased both in the January-March quarter of 2011 and the April?June quarter of 2011, while Capital goods Shipments, supply-side statistics, has been in a weak tone recently.

   According to the Bank of Japan short-term business sentiment survey (tankan), planned business investment in the fiscal year 2011 is expected to increase for the first time in four years for manufacturers, and that for non-manufacturers is expected to decrease for the fourth consecutive year, thus that for all industries is expected to increase for the first time in four years. According to the Business Outlook Survey, planned business investment in the fiscal year 2011 is expected to increase for both large manufacturers and large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are increasing moderately.

   As for short-term prospects, business investment is expected to resume picking up, due to the restoration demand from the earthquake disaster.

Housing construction is showing movements of picking up.

   Housing construction is showing movements of picking up due to the waning impact of the earthquake disaster.

  The total number of sales of condominiums in the Tokyo metropolitan area has been flat.

  As for short-term prospects, housing construction is expected to pick up moderately. However, the supply-demand situations of construction workers, in addition to employment and income environments, should be closely monitored.

Public investment has shown steady undertone, partly due to the effect of the FY2011 supplementary budget.

   Public investment has shown steady undertone, partly due to the effect of the FY 2011 supplementary budget.

   The amount of contracted public works in October 2011 and the amount of public works orders received in September 2011were higher than in the previous year, partly due to the effect of the FY2011 supplementary budget.

   As for short-term prospects, a boosting effect by the supplementary budget is expected.

Exports have been flat. Imports have been increasing moderately. The balance of goods and services remains on a deficit trend.

   Exports have been flat because the recovery of overseas economies has weakened. By region, exports to Asia have been flat. Exports to both the U.S. and the EU have been decelerating recently. As for short-term prospects, it should be noted that there are downside risks of overseas economies, as well as the impacts of the yen's appreciation and the flood disaster in Thailand.

   Imports have been increasing moderately. By region, imports from Asia have been increasing moderately. Imports from the U.S. have been flat. Imports from the EU have been gradually increasing. As for short-term prospects, although imports are expected to increase moderately, attention should be given to movements of domestic production and consumption.

   The balance of trade moved to surplus, as export values have increased while import values have decreased. The deficit in the services trade has been flat. The deficit in the services account exceeds the surplus in the trade account, thus, the balance of goods and services remains on a deficit trend. As for short-term prospects, the balance of goods and services will continue to be on a deficit trend for the time being.


2.Corporate activities and employment

Industrial production is still picking up slowly.

   Industrial production is still picking up slowly as the reconstruction of supply chains has progressed, due to weakened recovery of overseas economies.

   As for short-term prospects, production is expected to continue picking up along with the reconstruction of supply chains. At the same time, attention should be given to possible downside risks of overseas economies, the impacts of the yen's appreciation and the flood disaster in Thailand, and constraints on electric power supply.

   Also, the Survey of Production Forecasts expects an increase in both October and November.

Corporate profits have decreased. Firms' judgment on current business conditions is improving. However, small and medium-sized enterprises are cautious about the immediate future. The number of corporate bankruptcies is decreasing moderately.

   According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits during the April-June quarter of 2011 decreased by 14.6% in comparison with the previous year, thus posting a decline for the first time in seven quarters, due to a decrease in sales. By type of industry, profits in the manufacturing industry decreased by 15.3%, and profits in the non-manufacturing industry also decreased, by 14.2%. Seasonally adjusted changes from the previous quarter showed a decrease of 11.9%. According to the BOJ Tankan, sales in the fiscal year 2011 are expected to increase for the second consecutive year, and current profits in the fiscal year 2011 are expected to decrease for the first time in two years.

   The Tankan also reveals that firms' judgment on current business conditions is improving. Both large manufacturers and large non-manufacturers' judgments on current business conditions improved for the first time in two quarters. Both small manufacturers and small non-manufacturers’ judgments on current business conditions also improved for the first time in two quarters. However, small and medium-sized enterprises are cautious about the immediate future.

   The number of corporate bankruptcies is decreasing moderately, although the impact of the earthquake disaster still remained.

The employment situation still remains severe partly due to the earthquake disaster, although it also exhibits signs of picking up.

   The employment situation still remains severe partly due to the earthquake disaster, although it also exhibits signs of picking up.

   The national total unemployment rate including Iwate, Miyagi and Fukushima Prefectures, which was available from last month, was 4.1% in September. The total unemployment rate of those aged 15 to 24 was 6.8%.

   The national total unemployment rate excluding Iwate, Miyagi and Fukushima Prefectures has decreased 0.2 percentage points from the previous month to 4.1% in September. The labor force and the number of employed persons have been increasing, while the number of unemployed persons has been decreasing. The number of employees has been on a decreasing trend, although it increased in September.

   The effective ratio of job offers to applicants has been rising because of an increase in the number of new job offers. Overtime hours worked in the manufacturing industry have been moving horizontally.

   As for the movement of wages, contractual cash earnings are moving horizontally, while the total amount of cash earnings is showing weakness.

  As for short-term prospects, attention should be given to the impact of the earthquake disaster and production movements.


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 for the time being.

  Consumer prices remain on a declining trend. Taken together, these movements show that the Japanese economy is in a mild deflationary phase in that the decline in prices is continuing.

As for stock prices, the Nikkei Stock Average is moving at the range from the 8,300-yen level to the 9,000-yen level. The yen against the U.S. dollar hit a record postwar high, moving in the direction of appreciation to the 75-yen level, and thereafter it moved in the direction of depreciation to the 79-yen level. Thereafter, it has been appreciating again, moving to the 76-yen level.

Cabinet Office, Government of Japan1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8914, Japan.
Tel: +81-3-5253-2111