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Monthly Economic ReportExecutive Summary( May 2015 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery.

  • Private consumption is showing signs of picking up.
  • Business investment is almost flat.
  • Exports are almost flat.
  • Industrial production is picking up, while weakness can be seen in some areas.
  • Corporate profits show an 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 downfall in oil prices and 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.

(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 “Basic Policies for the Economic and Fiscal Management and Reform 2014” and “Japan Revitalization Strategy Revised in 2014”. And the Government also 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 January-March quarter of 2015 increased by 0.6% on a quarterly basis (at an annual rate of 2.4%), posting positive growth for the second consecutive quarter. Nominal GDP increased by 1.9% on a quarterly basis, posting positive growth for the second consecutive quarter.

Private consumption is showing signs of picking up.

  Private consumption is showing signs of picking up. The factors behind this include steady movements of real gross income of employees, while consumer sentiment 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 by 0.6% in March 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 almost flat.

  Business investment is almost flat. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), show that business investment increased in the October-December quarter of 2014 by 0.6% from the previous quarter. By industry, business investment increased for manufacturers by 1.8% from the previous quarter, and decreased for non-manufacturers by 0.1%. Capital Goods Shipments, supply-side statistics, are almost flat.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (March survey), planned business investment for manufacturers in fiscal year 2015 is expected to increase for five consecutive years, and that for non-manufacturers and all industries is expected to decrease for the first time in four years. According to the Business Outlook Survey (January-March survey), planned business investment in fiscal year 2015 is expected to increase for large manufacturers, and decrease for large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are showing movements of picking up.

  As for short-term prospects, business investment is expected to increase, mainly reflecting the improvement of corporate profits.

Housing construction has shown movements of picking up.

  Housing construction has shown movements of picking up. Construction of owned houses is picking up. Construction of houses for rent has shown a steady undertone. Construction of houses for sale has shown weakness. In addition, the total number of sales of condominiums in the Tokyo metropolitan area is picking up.

  As for short-term prospects, housing construction is expected to pick up. However, movements of construction costs, etc. should be closely monitored continuously.

Public investment generally shows weakness.

  Public investment generally shows weakness. The amount of contracted public works in April increased by 4.4% and the amount of public works orders received in March decreased by 9.9% from the previous year. The amount of public construction completed in the January-March quarter of 2015 decreased by 1.5% from the previous quarter, and that in March increased by 0.8% from the previous year and 0.9% from the previous month.

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

Exports are almost flat. Imports are almost flat. The deficits of the balance of goods and services are on a decreasing trend.

  Exports are almost flat. By region, exports to Asia are almost flat. Exports to the U.S. are picking up. Exports to EU and other regions 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 almost flat. By region, imports from Asia are flat. Imports from the U.S. show movements of picking up. Imports from 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 on a decreasing trend.

  The balance of trade in March moved to surplus, as export values increased and import values decreased substantially. The deficit in services decreased.


2. Corporate activities and employment

Industrial production is picking up, while weakness can be seen in some areas.

  Industrial production is picking up, while weakness can be seen in some areas. The Indices of Industrial Production decreased by 0.8% from the previous month in March. The Indices of Industrial Inventories increased by 0.4% from the previous month in March, an increase for the second consecutive month. Also, the Survey of Production Forecast in Manufacturing expects an increase of 2.1% from the previous month in April, and a decrease of 0.3% in May.

  By industry, transport equipment and electronic parts and devices are flat recently. General-purpose, production and business oriented machinery are showing movements of picking up.

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

Corporate profits show an 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 decreasing at a moderate pace.

  Corporate profits show an improvement. According to the BOJ Tankan (March survey), sales in fiscal year 2015 are expected to increase for six consecutive years, and current profits are expected to increase for four consecutive years. During the January-March quarter of 2015, current profits of the listed companies are almost at the same level as the previous year, while they generally remain at a high level.

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

  The number of corporate bankruptcies is decreasing at a moderate pace.

The employment situation shows a trend toward improvement.

  The employment situation shows a trend toward improvement. The total unemployment rate decreased by 0.1 percentage points from the previous month to 3.4% in March. The total unemployment rate of those aged 15 to 24 was 5.1%, a decrease of 1.2 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons decreased.

  The number of employees is on an upward trend recently. The number of new job offers shows movements of picking up and the effective ratio of job offers to applicants is on an upward trend. Overtime hours worked in the manufacturing industry are picking up.

  As for the movement of wages, contractual cash earnings show steady movement. The total amount of cash earnings is increasing moderately.

  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 rising moderately recently. Consumer prices are rising moderately.

  Producer prices are rising moderately 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 increased by 1.4 percent points from the previous month to 89.2% in April.

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

As for stock prices, after declining from the 19,900-yen level to the 19,200-yen level, the Nikkei Stock Average rose to the 20,400-yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 119-yen level to the 121-yen level.

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