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Monthly Economic ReportExecutive Summary( Apr 2013 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is showing movements of picking up recently, while weakness can be seen in some areas.

  • Exports are starting to level off. Industrial production is showing movements of picking up.
  • Corporate profits show signs of improvement, mainly among large firms. Business investment is starting to level off.
  • Firms’ judgment on current business conditions shows movements of improvement.
  • The employment situation shows signs of improvement recently, although some severe aspects still remain.
  • Private consumption is picking up.
  • Recent price developments indicate that the Japanese economy is in a mild deflationary phase.

Concerning short-term prospects, the recovery is expected to resume gradually supported by the improvement of confidence, the improvement of export conditions and the effect of the policy package and monetary policy. However, slowing down of overseas economies is still downside risk of the Japanese economy. Also, attention should be paid to the employment and income situations over the future.

(Policy stance)

To revitalize the Japanese economy, the Government will make its utmost efforts to move the economy onto the "virtuous cycle of growth and creating wealth," and to restore a robust economy, in addition to making go forward the reconstruction from the Great Earthquake. In order to correct excessive appreciation of yen and overcome deflation early, the Government will eliminate deflationary expectations and avoid further deterioration of economy with prompt and flexible economic and fiscal policy management. In particular, the market has recently observed situations such as rising share prices, expecting the economic recovery. The Government will ensure that these signs of improvement lead to realizing economic recovery via appropriate policy management.

Accordingly, the Government firmly manages progress of the Emergency Economic Measures including the FY2012 supplementary budget for its prompt and steady implementation, and works for early passage of the FY2013 budget and the related bills.

The Bank of Japan decided the introduction of the "quantitative and qualitative monetary easing" including of doubling the monetary base and increasing in JGB purchases and their maturity extension, in order to achieve the price stability target of two percent at the earliest possible time, with a time horizon of about two years.

The Government expects the Bank of Japan to achieve the price stability target of two percent at the earliest possible time.

Detailed explanations

1. Demand trends such as consumption and investment

Private consumption is picking up.

   Private consumption is picking up. One of the factors behind this is that although real income of employees remains broadly flat, consumer confidence is picking up. 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.), increased in February in comparison to January, while it also increased in terms of the three-month moving average.

  As for short-term prospects, private consumption is expected to continue to be on a pickup trend as confidence is improving. However, movements of employment and income should be closely monitored.

Business investment is starting to level off.

   Business investment is starting to level off. The Quarterly Financial Statements Statistics of Corporations by Industry, demand-side statistics, show that business investment increased for the first time in four quarters from the October-December quarter of 2011. In the October?December quarter of 2012, business investment decreased for manufacturers and increased for non-manufacturers. Capital Goods Shipments, supply-side statistics, have been almost flat.

   According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (March survey) by the Bank of Japan, planned business investment in the fiscal year 2013 is expected to decrease for the first time in three years for manufacturers, and that for non-manufacturers is expected to decrease for the first time in two years, thus that for all industries is expected to decrease for the first time in two years. According to the Business Outlook Survey by the Ministry of Finance and the Cabinet Office, planned business investment in fiscal year 2013 is expected to increase for large manufacturers and to decrease for large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are on a picking up trend, but substantially decreased in January from the previous month.

   As for short-term prospects, business investment is expected to pick up, reflecting the improvement of corporate profits and confidence, etc.

Housing construction has shown a steady undertone.

   Housing construction has shown a steady undertone. Construction of owned houses, houses for rent and houses for sale has shown a steady undertone.

   The total number of sales of condominiums in the Tokyo metropolitan area has been showing movements of picking up recently.

   As for short-term prospects, housing construction is expected to show steady movement, due to improvement of confidence with continuously lasting reconstruction demand. However, the supply-demand situations of construction workers should be closely monitored.

Public investment has generally shown a steady undertone.

   Public investment has generally shown a steady undertone.

   The amount of contracted public works in March 2013 was lower than in the previous year. The amount of public works orders received in February 2013 was higher than in the previous year.

   As for short-term prospects, steady movement is expected to be intensified gradually, partly due to a boosting effect by the supplementary budget.

   In the general account of the budget plan for FY 2013, the government plans to increase expenses relate to public investment by 15.6% from the previous fiscal year. Out of local public investment expenses under the fiscal plans of local governments, those for projects undertaken by local governments on their own funding have been slashed by 5.8% from the previous fiscal year (increased by 2.6 % in a case where expenses for urgent disaster prevention and mitigation projects are included).

Exports are starting to level off. Imports have been flat. The deficits of the balance of goods and services have been on an upward trend.

  Exports are starting to level off. By region, exports to Asia have been gradually decreasing. Exports to the U.S. have leveled off. Exports to the EU are starting to level off. As for short-term prospects, exports are expected to level off, reflecting the steady overseas economies and the trend of exchange rate depreciation of the yen. However, it should be noted that there are risks of downturn in overseas economies.

   Imports have been flat. By region, imports from Asia have been flat. Imports from the U.S. have been flat recently. Imports from the EU are showing signs of leveling off. As for short-term prospects, imports are expected to remain broadly flat for the time being

   The deficits of the balance of goods and services have been on an upward trend.

   The deficit in the balance of trade in February increased, as export values have decreased and import values have increased. The deficit in the services trade has decreased.


2. Corporate activities and employment

Industrial production is showing movements of picking up.

   Industrial production is showing movements of picking up. By type of industry, transport equipment is picking up. General machinery has been flat. Electronic parts and devices are in a weak tone.

   As for short-term prospects, production is expected to pick up, reflecting the improvement of export conditions and steady domestic demand.

   Also, the Survey of Production Forecasts expects an increase in both March and April.

Corporate profits show signs of improvement, mainly among large firms. Firms' judgment on current business conditions shows signs of improvement. The number of corporate bankruptcies has been moderately decreasing recently.

  According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits during the October-December quarter of 2012 increased by 7.9% in comparison with the previous year. Moreover, seasonally adjusted changes from the previous quarter showed an increase of 2.4%, thus, they show signs of improvement, mainly among large firms. By type of industry, profits in the manufacturing industry increased by 21.4% in comparison with the previous year, and profits in the non-manufacturing industry also increased by 2.0%. According to the BOJ Tankan (March survey), corporate profits show that sales in fiscal year 2013 are expected to increase for the fourth consecutive year, and current profits are expected to increase for the second consecutive year.

   The Tankan (March survey) also reveals that firms' judgment on current business conditions shows an improvement by 1 point for all enterprises in all industries. By industry, large manufacturers' judgment on current business conditions improved by 4 points, that for large non-manufacturers improved by 2 points, that for small manufacturers decreased by 1 point, and that for small non-manufacturers improved by 3 points. According to the Economy Watchers Survey (March survey), current business conditions improved for the fifth consecutive month, and prospective business conditions decreased for the first time in five months.

   The number of corporate bankruptcies has been moderately decreasing recently.

The employment situation shows signs of improvement recently, although some severe aspects still remain.

   The employment situation shows signs of improvement recently, although some severe aspects still remain.

   The total unemployment rate has increased by 0.1 percentage points from the previous month to 4.3% in February. The total unemployment rate of those aged 15 to 24 was 6.6%, a decrease of 0.7 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons have been increasing. The number of employees has been moving horizontally.

   The effective ratio of job offers to applicants has been on a rising trend because of an increase in the number of new job offers, etc. Overtime hours worked in the manufacturing industry have been increasing recently.

   As for the movement of wages, although contractual cash earnings have been showing steady movement, the total amount of cash earnings has been moving horizontally.

   Firms' judgment on current employment conditions showed that the excessiveness of the number of employees has decreased in March.

   As for short-term prospects, the employment situation is expected to improve, though some severe aspects still remain. In addition, attention should be given to remaining movements of employment adjustment in the manufacturing industry.


3. Prices and the financial market

Domestic corporate goods prices have been rising at a moderate pace. Consumer prices have declined moderately.

   Domestic corporate goods prices have been rising at a moderate pace.

   Consumer prices, in terms of "general, excluding fresh food, petroleum products and other specific components" (referred to as "core core"), have declined moderately.

   According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices increased from the previous month in February.

   As for short-term prospects, consumer prices (core core) are expected to remain on a moderate downward trend for the time being.

   Reviewing price movements comprehensively, including a decline in consumer prices (core core) on a year-on-year basis, 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 rose from the 12,200-yen level to the 13,200-yen level. The yen against the U.S. dollar is moving in the direction of appreciation from the 95-yen level to the 93-yen level, and thereafter, it is moving in the direction of depreciation to the 99-yen level.

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