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Monthly Economic ReportExecutive Summary( September 2015 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery, while slowness can be seen in some areas.

  • Private consumption holds firm as a whole.
  • Business investment is picking up generally.
  • Exports are in a weak tone recently.
  • Industrial production is flat recently.
  • Corporate profits are improving. Firms’ judgment on current business conditions is almost flat, while cautiousness 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, there are downside risks of the Japanese economy including slowing down of emerging Asian economies including the Chinese economy as the process of U.S. monetary policy normalization emerges. In addition, attention should be given to the effects of lengthening of fluctuations in the financial and capital markets under such circumstances.

(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

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 0.0% in July 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 generally.

  Business investment is picking up generally. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey) show that business investment decreased in the April-June quarter of 2015 by 2.7% from the previous quarter after increasing in the January-March quarter of 2015 by 6.0%. By industry, business investment increased for manufacturers by 0.4% from the previous quarter, and decreased for non-manufacturers by 4.4%. 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 (July-September 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 on a trend of 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 almost flat. 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 August decreased by 1.3% and the amount of public works orders received in July decreased by 9.2% from the previous year. The amount of public construction completed in July increased by 4.4% from the previous year, and by 1.1% 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 almost 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 July increased, as the increase in export values was smaller than the increase in import values. The deficit in services decreased.


2. Corporate activities and employment

Industrial production is flat recently.

  Industrial production is flat recently. The Indices of Industrial Production decreased by 0.8% from the previous month in July. The Indices of Industrial Inventories decreased by 0.8% from the previous month in July. Also, the Survey of Production Forecast in Manufacturing expects an increase of 2.8% from the previous month in August, and a decrease of 1.7% in September.

  By industry, transport equipment is in a weak tone recently. General-purpose, production and business oriented machinery are flat recently. 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 are improving. Firms' judgment on current business conditions is almost flat, while cautiousness can be seen in some areas. The number of corporate bankruptcies is almost flat.

  Corporate profits are improving. According to the Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey), corporate profits during the April-June quarter of 2015 increased by 23.8% from the previous year and by 14.8% from the previous quarter. By size of company, large and medium-sized companies saw an increase of 23.2% in corporate profits from the previous year, and small companies saw an increase of 26.0%. 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.

  Firms' judgment on current business conditions is almost flat, while cautiousness 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. Firms' judgment on future business conditions, which indicates the business condition as of September, remained flat from that on current business conditions. Amid these situations, according to the corporate activity-related DI of the Economy Watchers Survey (August survey), current and prospective business conditions fell, reaching lower than 50, which indicates being flat.

  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 decreased by 0.1 percentage points from the previous month to 3.3% in July. The total unemployment rate of those aged 15 to 24 was 5.5%, a decrease of 0.1 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 almost flat recently. The number of new job offers is almost flat recently. The effective ratio of job offers to applicants is rising. 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.

  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 declining moderately recently. Consumer prices are rising moderately.

  Producer prices are declining 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. Changes from the previous month showed increases of 0.2% on both a chain base and a fixed base in July. Consumer prices, in terms of “general excluding fresh food” (referred to as “core”), are flat.

  According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices was 85.5% in August.

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

As for stock prices, the Nikkei Stock Average moved at the 17,400-yen level to the 19,100-yen level. The yen against the U.S. dollar moved at the 119-yen level to the 121-yen level.

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