Cabinet Office, Government of Japan

English Home  >  Monthly Economic Report  >  Monthly Economic Report Executive Summary( May 2016 )

Monthly Economic ReportExecutive Summary( May 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, although the pace has become moderate. 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 will decide the "Basic Policies for Economic and Fiscal Management and Reform 2016(provisional)", the "Japan Revitalization Strategy 2016(provisional)" , the "Regulatory Reform Work Plan" , the "Basic Policies for Overcoming Population Decline and Vitalizing Local Economy in Japan 2016", and the "Japan's Plan for the Dynamic Engagement of All Citizens". The Government also swiftly and steadily implements the FY2015 supplementary budget and accelerates the implementation of the FY2016 budget, and will implement that in the first half of FY2016 as much as possible.
 Utilizing the FY2016 supplementary budget passed on May 17th, etc., the Government will make sure to support for the daily lives of those affected by the the 2016 Kumamoto Earthquake, and also work on 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

  Real GDP (gross domestic product) in the January-March quarter of 2016 increased by 0.4% on a quarterly basis (at an annual rate of 1.7%), posting positive growth for the first time in two quarters. Nominal GDP increased by 0.5% on a quarterly basis, posting positive growth for the first time in two quarters.

Private consumption is almost flat, while consumer confidence appears to be pausing.

  Private consumption is almost flat. Real gross income of employees is increasing moderately, 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 0.1% in March from the previous month.

  As for short-term prospects, the Synthetic Consumption index is expected to pick up, supported by the improvement in the employment and income situations. However, attention should be given to the trend of consumer confidence.

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 has been showing movements of picking up recently.

  Housing construction has been showing movements of picking up recently. Construction of owned houses and houses for sale have been showing movements of picking up recently. Construction of houses for rent 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 pick up gradually.

Public investment is decreasing moderately.

  Public investment is decreasing moderately.

  The amount of public construction completed in March decreased by 0.8% from the previous month, and decreased by 6.4% from the previous year. The amount of contracted public works in April increased by 10.6% and the amount of public works orders received in March increased by 13.1% from the previous year.

  As for short-term prospects, a boosting effect by the early execution of related budgets and the supplementary budget is expected.

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 and the U.S. are almost flat. Exports to the EU show movements of picking up. 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 weak tone. 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 March increased, as import values decreased to a greater extent than export values. The balance of service moves to deficit.


2. Corporate activities and employment

Industrial production is flat.

  Industrial production is flat. The Indices of Industrial Production increased by 3.8% from the previous month in March. The Indices of Industrial Inventories increased by 2.9% from the previous month in March.

  The Survey of Production Forecast in Manufacturing expects an increase of 2.6% in April, and a decrease of 2.3% in May. However, it should be noted that this survey does not consider the impact of the 2016 Kumamoto Earthquake.

  By industry, transport equipment is almost flat. 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, although the pace has become moderate. Firms' judgment on current business conditions shows cautiousness. The number of corporate bankruptcies is almost flat.

  Corporate profits show a trend toward improvement, although the pace has become moderate. During the January-March quarter of 2016, the current profits of the listed companies decreased from the previous year both for manufacturers and non-manufacturers. According to the BOJ Tankan (March survey), sales and current profits in fiscal year 2016 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, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (April survey), current and 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 3.2% in March, a decrease of 0.1 percentage points from the previous month. The total unemployment rate of those aged 15 to 24 was 5.8%, 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 on an increasing trend. The number of new job offers is on an increasing trend. The effective ratio of job offers to applicants is increasing. Overtime hours worked in the manufacturing industry are in a weak tone.

  As for the movement of wages, contractual cash earnings are almost flat. The total amount of cash earnings is increasing moderately.

  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 82.3% in April, an increase of 4.5% points from the previous month.

  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 17,500-yen level to the 16,100-yen level, the Nikkei Stock Average rose to the 16,600-yen level. The yen against the U.S. dollar, after moving in the direction of depreciation from the 109-yen level to the 111-yen level, moved in the direction of appreciation to the 106-yen level, and thereafter moved to the direction of depreciation to the 110-yen level.

Cabinet Office, Government of Japan1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8914, Japan.
Tel: +81-3-5253-2111