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Monthly Economic ReportExecutive Summary( August 2015 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery, while variation in tempo of improvement can be seen in some areas.

  • Private consumption holds firm as a whole.
  • Business investment is picking up recently.
  • Exports are in a weak tone recently.
  • Industrial production is flat recently.
  • Corporate profits generally show a trend toward improvement. Firms’ judgment on current business conditions is almost flat, while signs of improvement can be seen in some areas.
  • The employment situation shows a trend toward improvement.
  • Consumer prices are rising moderately.

  Concerning short-term prospects, the economy is expected to recover, supported by the effects of the policies, while employment and income situation show a trend toward improvement. However, attention should be given to the downside risks of the Japanese economy including slowing down of overseas economies including the Chinese economy, and fluctuations in the financial and capital markets.

(Policy stance)

 The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscal consolidation simultaneously, in addition to accelerate the reconstruction from the Great Earthquake. To this end, the Government steadily implements the “Basic Policy on Economic and Fiscal Management and Reform 2015”, the “Japan Revitalization Strategy Revised in 2015”, the “Regulatory Reform Work Plan” and the “Basic Policyies for Overcoming Population Decline and Vitalizing Local Economy in Japan 2015”.
 The Government strongly implements the "Initiatives by the "Seiroshi"(Government, Labor, and Corporate Management) for Continuing Virtuous Cycles of the Economy". The Government continuously pursues to expand the economic virtuous cycles which cover local areas, SMEs and small-scale businesses, through directing growing corporate profits towards business investment, wage increase and further improvement in the employment situation by these measures.
 The Government swiftly and steadily implements “Immediate Economic Measures for Extending Virtuous Cycles to the Local Economies” and the FY2014 supplementary budget to target at vulnerable parts of the current economy and intend to solve such vulnerabilities as soon as possible.
 And the Government also works for smooth and steadily implementation of the FY2015 budget.
 The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity and prices.

Detailed explanations

1. Demand trends such as consumption and investment

Real GDP (gross domestic product) in the April-June quarter of 2015 decreased by 0.4% on a quarterly basis (at an annual rate of 1.6%), posting negative growth for the first time in three quarters. Nominal GDP increased by 0.0% on a quarterly basis, posting positive growth for the third consecutive quarter.

Private consumption holds firm as a whole.

  Private consumption holds firm as a whole. Real gross income of employees is picking up. Movements of picking up in consumer sentiment appear to be pausing.

  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 by 0.7% in June from the previous month.

  Concerning short-term prospects, consumption is expected to pick up, supported by the improvement trend in the employment and income situations.

Business investment is picking up recently.

  Business investment is picking up recently. The Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey), show that business investment increased in the January-March quarter of 2015 by 5.8% from the previous quarter. By industry, business investment increased for manufacturers by 2.3% from the previous quarter, and for non-manufacturers by 7.6%. Capital Goods Shipments, supply-side statistics, are almost flat.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (June survey), planned business investment for all industries in fiscal year 2015 is expected to increase for four consecutive years, that for manufacturers is expected to increase for five consecutive years, and that for non-manufacturers is expected to decrease for the first time in four years. According to the Business Outlook Survey (April-June survey), planned business investment in fiscal year 2015 is expected to increase for both 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 increase, mainly reflecting the improvement of corporate profits.

Housing construction is picking up.

  Housing construction is picking up. Construction of owned houses is generally picking up. Construction of houses for rent and houses for sale is picking up. In addition, the total number of sales of condominiums in the Tokyo metropolitan area is almost flat.

  As for short-term prospects, housing construction is expected to continue to show a trend of picking up .

Public investment generally shows weakness.

  Public investment generally shows weakness. The amount of contracted public works in July decreased by 10.1% and the amount of public works orders received in June decreased by 4.2% from the previous year. The amount of public construction completed in June increased by 3.1% from the previous year and decreased by 0.0% from the previous month.

  As for short-term prospects, public investment is expected to continue being weak.

Exports and Imports are in a weak tone recently. The deficit in the balance of goods and services is almost flat.

  Exports are in a weak tone recently. By region, exports to Asia, the U.S. and other regions are in a weak tone recently. Exports to the EU are flat. As for short-term prospects, exports are expected to pick up gradually, mainly reflecting the moderate recovery of overseas economies. However, it should be noted that there are risks of a downturn in overseas economies.

  Imports are in a weak tone recently. By region, imports from Asia are in a weak tone recently. Imports from the U.S. and the EU are almost flat. As for short-term prospects, imports are expected to pick up gradually.

  The deficit in the balance of goods and services is almost flat.

  The deficit in the balance of trade in June decreased, as the increase in export values was larger than the increase in import values. The deficit in services increased.


2. Corporate activities and employment

Industrial production is flat recently.

  Industrial production is flat recently. The Indices of Industrial Production increased by 1.1% from the previous month in June. The Indices of Industrial Inventories increased by 1.5% from the previous month in June. Also, the Survey of Production Forecast in Manufacturing expects an increase of 0.5% from the previous month in July, and 2.7% in August.

  By industry, transport equipment is in a weak tone recently. General-purpose, production and business oriented machinery are showing movements of picking up. Electronic parts and devices are in a weak tone recently.

  As for short-term prospects, production is expected to pick up gradually mainly reflecting the moderate recovery of overseas economies.

Corporate profits generally show a trend toward improvement. Firms' judgment on current business conditions is almost flat, while signs of improvement can be seen in some areas. The number of corporate bankruptcies is almost flat.

  Corporate profits generally show a trend toward improvement. According to the BOJ Tankan (June survey), sales in fiscal year 2015 are expected to increase for six consecutive years, and current profits are expected to decrease slightly. During the April-June quarter of 2015, the current profits of the listed companies increased from the previous year

  Firms' judgment on current business conditions is almost flat, while signs of improvement can be seen in some areas. The Tankan (June survey) revealed that firms' judgment on current business conditions is flat for all enterprises in all industries, while that for large non-manufacturers, etc. improved. Firms' judgment on future business conditions, which indicates the business condition as of September, remained flat from that on current business conditions. Various surveys showed that firms' judgment on current business conditions is almost flat. According to the corporate activity-related DI of the Economy Watchers Survey (July survey), current business conditions rose, while prospective business conditions fell.

  The number of corporate bankruptcies is almost flat.

The employment situation shows a trend toward improvement.

  The employment situation shows a trend toward improvement. The total unemployment rate increased by 0.1 percentage points from the previous month to 3.4% in June. The total unemployment rate of those aged 15 to 24 was 5.6%, an increase of 0.1 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons increased.

  The number of employees is almost flat recently. The number of new job offers is almost flat recently. The effective ratio of job offers to applicants is on an upward trend. Overtime hours worked in the manufacturing industry are in a weak tone recently.

  As for the movement of wages, contractual cash earnings are picking up. The total amount of cash earnings is increasing moderately. Special cash earnings in June were lower than those in the previous year. This seemed to be effected mainly by changes in bonus payment days.

  As for short-term prospects, the employment situation is expected to continue to show a trend toward improvement.


3. Prices and the financial market

Producer prices are flat recently. Consumer prices are rising moderately.

  Producer prices are flat recently.

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

  According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices was 87.7% in July.

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

As for stock prices, after moving at the 20,000-yen level to the 20,800-yen level, the Nikkei Stock Average declined to the 18,500-yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 123-yen level to the 125-yen level, and thereafter moved in the direction of appreciation to the 120-yen level.

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