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Monthly Economic ReportExecutive Summary( April 2016 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery, while weakness can be seen recently.

  • Private consumption is almost flat, while consumer confidence appears to be pausing.
  • Business investment is picking up.
  • Exports are almost flat.
  • Industrial production is flat.
  • Corporate profits show a trend toward improvement, mainly among non-manufacturers. Firms’ judgment on current business conditions shows cautiousness.
  • The employment situation is improving.
  • Consumer prices are rising moderately.

  Concerning short-term prospects, the economy is expected toward recovery, supported by the effects of the policies, while employment and income situation is improving. However, there are downside risks of the Japanese economy including slowing down of emerging Asian economies including the Chinese economy and countries with natural resources amid the weakness of overseas economies. In addition, attention should be given to the increased uncertainty in overseas economies and the effects of fluctuations in the financial and capital markets under such circumstances. Also, full attention should be given to the economic impact of the 2016 Kumamoto Earthquake.

(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 make effort toward the reconstruction and revitalization from the Great East Japan 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 Policy for Overcoming Population Decline and Vitalizing Local Economy in Japan 2015". The Government also swiftly and steadily implements "TPP Policy Plan" , "Urgent Policies to Realize a Society in Which All Citizens are Dynamically Engaged" and the FY2015 supplementary budget based on them. And the government accelerates the implementation of the FY2016 budget, and will implement that in the first half of FY2016 as much as possible.
 The Government will make sure to support for the daily lives of those affected by the 2016 Kumamoto Earthquake. The Government also work on analyzing its economic impact at an early date and promoting early recovery of the local economy and industries.
 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 investment, wage increase and further improvement in the employment situation by these measures.
 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 is almost flat, while consumer confidence appears to be pausing.

  Private consumption is almost flat. Real gross income of employees is picking up, while consumer confidence appears 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 0.2% in February from the previous month.

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

Business investment is picking up.

  Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey) show that business investment decreased in the October-December quarter of 2015 by 0.0% from the previous quarter after increasing in the July-September quarter of 2015 by 5.7%. By industry, business investment increased for manufacturers by 0.1% 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 all industries and that for non-manufacturers in fiscal year 2015 are expected to increase for four consecutive years, and that for manufacturers is expected to increase for five consecutive years. As for fiscal year 2016, planned business investment for all industries is expected to decrease. According to the Business Outlook Survey (January-March survey), planned business investment for all industries in fiscal year 2015 is expected to increase further than the last survey. As for fiscal year 2016, planned business investment is expected to decrease. The figures for Orders Received for Machinery, a leading indicator, show movements of picking up.

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

Housing construction is almost flat.

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

  As for short-term prospects, housing construction is expected to remain flat for the time being.

Public investment is decreasing moderately.

  Public investment is decreasing moderately. The amount of contracted public works in March increased by 5.0% and the amount of public works orders received in February increased by 2.7% from the previous year. The amount of public construction completed in February decreased by 4.4% from the previous year, and decreased by 1.1% from the previous month.

  As for short-term prospects, public investment is expected to be supported gradually by the early execution of related budgets.

Exports and imports are almost flat. The surplus in the balance of goods and services is on an increasing trend.

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

  The surplus in the balance of goods and services is on an increasing trend.

  The surplus in the balance of trade in February increased, as import values decreased to a greater extent than export values. The balance of services moves to surplus.


2. Corporate activities and employment

Industrial production is flat.

  Industrial production is flat. The Indices of Industrial Production decreased by 5.2% from the previous month in February. The Indices of Industrial Inventories decreased by 0.4% from the previous month in February. The Survey of Production Forecast in Manufacturing expects an increase of 3.9% in March, and an increase of 5.3% in April.

  By industry, transport equipment shows movements of picking up. General-purpose, production and business-oriented machinery are decreasing. 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 show a trend toward improvement, mainly among non-manufacturers. Firms’ judgment on current business conditions shows cautiousness. The number of corporate bankruptcies is almost flat.

  Corporate profits show a trend toward improvement, mainly among non-manufacturers. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2015 decreased by 1.7% from the previous year and by 1.5% from the previous quarter. By industry, manufacturers saw a decrease of 21.2% in corporate profits from the previous year, while non-manufacturers saw an increase of 12.7%. By size of company, large and medium-sized companies saw a decrease of 6.7% from the previous year, while small companies saw an increase of 10.2%. According to the BOJ Tankan (March survey), in fiscal year 2015, sales are expected to decrease, while current profits are expected to increase for four consecutive years. In fiscal year 2016, sales and current profits are expected to decrease.

  Firms’ judgment on current business conditions shows cautiousness. The Tankan (March survey) revealed that firms' judgment on current business conditions becomes cautious for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of June, become more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (March survey), current business conditions rose, while prospective business conditions fell.

  The number of corporate bankruptcies is almost flat.

The employment situation is improving.

  The employment situation is improving. The total unemployment rate was 3.3% in February, an increase of 0.1 percentage points from the previous month. The total unemployment rate of those aged 15 to 24 was 5.9%, an increase of 0.9 percentage points from the previous month. The labor force and the number of employed persons decreased, while the number of unemployed persons increased.

  The number of employees is on an increasing trend. The number of new job offers is increasing. 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 almost flat. The total amount of cash earnings is increasing moderately.

  According to the BOJ Tankan (March survey), firms' judgment on current employment conditions shows that the labor shortage is almost flat.

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


3. Prices and the financial market

Producer prices are declining moderately. Consumer prices are rising moderately.

  Producer prices are declining moderately.

  Consumer prices, in terms of general, excluding fresh food, petroleum products and other specific components, are rising moderately.

  According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 77.8% in March.

  As for short-term prospects, consumer prices (general, excluding fresh food, petroleum products and other specific components) are expected to rise moderately for the time being.

As for stock prices, after declining from the 16,800-yen level to the 15,700-yen level, the Nikkei Stock Average rose to the 16,800-yen level with large fluctuations. The yen against the U.S. dollar moved in the direction of appreciation from the 112-yen level to the 109-yen level.

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