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Monthly Economic ReportExecutive Summary( Nov 2013 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on the way to recovery at a moderate pace.

  • Exports are in a weak tone recently. Industrial production is increasing at a moderate pace.
  • Corporate profits keep improving, mainly among large firms. Business investment shows movements of picking up, mainly among non-manufacturing industries.
  • Firms' judgment on current business conditions is further improving.
  • The employment situation is improving.
  • Private consumption is on a trend of picking up.
  • Recent price developments indicate that the deflation is ending.

Concerning short-term prospects, the recovery is expected to take hold as household income and business investment continue to be on upward trends, while exports move toward picking up and the effects of the policies develop.A last-minute rise in demand before a consumption tax increase is also expected. However, slowing down of overseas economies is still downside risk of the Japanese economy.

(Policy stance)

The Government will make its utmost efforts to overcome deflation early and achieve the revitalization of the Japanese economy, in addition to accelerate the reconstruction from the Great Earthquake. To this end, the Government implements economic and fiscal policies based on the "Basic Policies for Economic and Fiscal Management and Reform" , and accelerates and also strengthens implementations of the "Japan Revitalization Strategy". Furthermore, for realizing a positive cycle of the economy, the Government steadily implements the "Economic Policy Package".

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

  Real GDP (gross domestic product) in the July - September quarter of 2013 increased by 0.5% on a quarterly basis (at an annual rate of 1.9%), posting positive growth for the fourth consecutive quarter. Nominal GDP increased by 0.4% on a quarterly basis, posting positive growth for the fourth consecutive quarter.

Private consumption is on a trend of picking up.

  Private consumption is on a trend of picking up. One of the factors behind this is that although consumer confidence is in a weak tone lately, real income of employees hold firm. 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 by 0.7% in September in comparison to August, while it also increased in terms of the three-month moving average.

   Concerning short-term prospects, the recovery is expected to continue on a pickup trend, supported by the improvement of the employment and income situations, and a last-minute rise in demand before a consumption tax increase in some sectors.

Business investment shows movements of picking up, mainly among non-manufacturing industries.

   Business investment shows movements of picking up, mainly among non-manufacturing industries. The Quarterly Financial Statements Statistics of Corporations by Industry, demand-side statistics, show that business investment increased in the April-June quarter of 2013 by 2.9% from the previous quarter, the third consecutive quarter of increase. By industry, business investment decreased for manufacturers by 0.6% from the previous quarter, and increased for non-manufacturers by 4.7% from the previous quarter. Capital Goods Shipments, supply-side statistics, show steady movement.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (September survey) by the Bank of Japan, planned business investment in fiscal year 2013 is expected to increase for the third consecutive year for manufacturers, and that for non-manufacturers is expected to increase for the second consecutive year, thus, for all industries, investment is expected to increase for the second consecutive year. 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 both for large manufacturers and large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are picking up.

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

Housing construction is increasing with a last-minute rise in demand before a consumption tax increase.

  Housing construction is increasing with a last-minute rise in demand before a consumption tax increase. Construction of owned houses, houses for rent and houses for sale is increasing.

  The total number of sales of condominiums in the Tokyo metropolitan area is increasing.

  As for short-term prospects, housing construction is expected to continue to be on an upward trend for the time being, supported by the improvement of the employment and income situations, and a last-minute rise in demand before a consumption tax increase. However, the supply-demand situations of construction workers should be closely monitored.

Public investment shows steady performance.

   Public investment shows steady performance. The amount of contracted public works in October 2013 and the amount of public works orders received in September 2013 and the turnover of public construction in September 2013 increased by 3.5%, 44.6% and 26.7% respectively from the previous year.

  As for short-term prospects, public investment is expected to show steady movement due to the execution of related budgets.

Exports are in a weak tone recently. Imports show movements of picking up recently. The deficits of the balance of goods and services are on an upward trend.

  Exports are in a weak tone recently. By region, exports to Asia are almost flat. Exports to the U.S. and EU are flat recently. On the other hand, exports to others seem to be in a weak tone recently. As for short-term prospects, exports are expected to pick up gradually, reflecting the steady overseas economies and the trend of exchange rate depreciation of the yen so far. However, it should be noted that there are risks of a downturn in overseas economies.

  Imports show movements of picking up recently. By region, imports from Asia show movements of picking up. Imports from the U.S. are flat recently. Imports from EU show movements of picking up recently. As for short-term prospects, imports are expected to show steady movement.

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

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


2. Corporate activities and employment

Industrial production is increasing at a moderate pace.

  Industrial production is increasing at a moderate pace. By type of industry, general-purpose, production and business oriented machinery is picking up. Transport equipment, electronic parts and devices show a steady undertone.

  As for short-term prospects, production is expected to increase at a moderate pace, reflecting the improvement of export conditions and domestic demand being in good condition.

  Also, the Survey of Production Forecasts expects an increase of 4.7% in October and a decrease of 1.2% in November from the previous month.

Corporate profits keep improving, mainly among large firms. Firms’ judgment on current business conditions is further improving. The number of corporate bankruptcies is almost flat.

  Corporate profits keep improving, mainly among large firms. According to the BOJ Tankan (September survey), 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 settlement during the July - September quarter of 2013 for the listed companies shows that profits increased both for manufacturers and non-manufacturers.

  Firms’ judgment on current business conditions is further improving. The Tankan (September survey) revealed that firms’ judgment on current business conditions improved by 4 points for all enterprises in all industries. By industry, large manufacturers’ judgment on current business conditions improved by 8 points, that for large non-manufacturers improved by 2 points, that for small manufacturers improved by 5 points, and that for small non-manufacturers improved by 3 points. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), both current and prospective business conditions decreased.

  The number of corporate bankruptcies is almost flat.

The employment situation is improving.

   The employment situation is improving. The total unemployment rate decreased by 0.1 percentage points from the previous month to 4.0% in September. The total unemployment rate of those aged 15 to 24 was 7.3%, an increase of 0.3 percentage points from the previous month. The labor force and the number of employed persons increased, and the number of unemployed persons decreased.

  The number of employees is on an upward trend. The effective ratio of job offers to applicants is increasing because of an increase in the number of new job offers, etc. Overtime hours worked in the manufacturing industry are on an upward trend.

  As for the movement of wages, contractual cash earnings are almost flat. The total amount of cash earnings shows steady movement.

  As for short-term prospects, the employment situation is expected to improve.


3. Prices and the financial market

Domestic corporate goods prices are rising at a moderate pace. Consumer prices show a steady undertone.

  Domestic corporate goods prices are 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”), show a steady undertone.

  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 October.

  As for short-term prospects, consumer prices (core core) are expected to hold firm for the time being.

  Taken together, these recent movements show that the deflation is ending.

As for stock prices, after rising from the 14,000-yen level to the 14,500-yen level, the Nikkei Stock Average declined to the 14,000-yen level, and thereafter rose again to the 15,000- yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 97-yen level to the 100-yen level.

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