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Monthly Economic ReportExecutive Summary( Nov 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 holds firm as a whole.
  • Business investment improvement appears to be pausing.
  • Exports are almost flat.
  • Industrial production is showing movements of picking up.
  • Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions is almost flat, while signs of cautiousness can be seen in some areas.
  • The employment situation is improving.
  • Consumer prices are flat.

  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,attention should be given to the uncertainty in overseas economies and the effects of 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 make effort toward the reconstruction and revitalization from the Great East Japan Earthquake. To this end, the Government steadily implements the "Basic Policies for Economic and Fiscal Management and Reform 2016", the "Japan Revitalization Strategy 2016" , 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". In addition, the government promotes working-style reform, developing a concreate action plan by the end of FY2016, and implements "Economic Measures for Realizing Investment for the Future" and the FY2016 supplementary budget swiftly and steadily in order to overcome deflation completely and pave the way for steady economic growth.
  Utilizing the FY2016 supplementary budget etc., the Government will make sure to support for the daily lives of those affected by 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 July-September quarter of 2016 increased by 0.5% on a quarterly basis (at an annual rate of 2.2%), posting positive growth for the third consecutive quarter. Nominal GDP increased by 0.2% 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 wage income of employees is increasing moderately. Consumer confidence shows movements of 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 0.3% in September 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 improvement appears to be pausing.

  Business investment improvement appears to be pausing. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey) show that business investment decreased in the April-June quarter of 2016 by 0.5% from the previous quarter after decreasing in the January-March quarter of 2016 by 0.0%. By industry, business investment increased for manufacturers by 2.0% from the previous quarter, and decreased for non-manufacturers by 1.9%. Capital Goods Shipments, supply-side statistics, have been showing movements of picking up recently.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (September survey), planned business investment for all industries in fiscal year 2016 is expected to increase for five consecutive years, that for manufacturers is expected to increase for six consecutive years, while that for non-manufacturers is expected to decrease for the first time in five years. According to the Business Outlook Survey (July-September survey), planned business investment in fiscal year 2016 is expected to increase for manufacturers, and decrease for non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, appear to be pausing.

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

Housing construction has been flat recently.

  Housing construction has been flat recently. Construction of owned houses is almost flat. Construction of houses for rent is increasing. Construction of houses for sale has been in a weak tone recently. In addition, the total number of sales of condominiums in the Tokyo metropolitan area has been shown movements of picking up recently.

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

Public investment holds firm .

  Public investment holds firm. The amount of public construction completed in September decreased by 0.0% from the previous month, and decreased by 1.5% from the previous year. The amount of contracted public works in October decreased by 10.0% and the amount of public works orders received in September increased by 41.4% from the previous year.

  As for short-term prospects, a boosting effect by the supplementary budget is expected.

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

  Exports are almost flat. By region, exports to Asia, the U.S., the EU and other regions are almost flat. As for short-term prospects, exports are expected to pick up gradually, mainly reflecting the moderate recovery of overseas economies.

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

  The surplus in the balance of goods and services is flat.

  The surplus in the balance of trade in September decreased, as export values decreased while import values increased. The deficit in the balance of services increased.


2. Corporate activities and employment

Industrial production is showing movements of picking up.

  Industrial production is showing movements of picking up. The Indices of Industrial Production increased by 0.6% in September from the previous month. The Indices of Industrial Inventories decreased by 0.5% in September from the previous month. The Survey of Production Forecast in Manufacturing expects an increase of 1.1% in October, and an increase of 2.1% in November.

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

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

Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions is almost flat, while signs of cautiousness can be seen in some areas. The number of corporate bankruptcies is almost flat.

  Corporate profits improvement appears to be pausing, although they remain at a high level. During the July-September quarter of 2016, the current profits of the listed companies decreased from the previous year for manufacturers, and increased for non-manufacturers. According to the BOJ Tankan (September Survey), in fiscal year 2016, sales are expected to decrease by 2.2% in the first half of the year, and are expected to increase by 0.4% in the second half from the previous year. Current profits are expected to decrease by 13.9% in the first half, and decrease by 1.7% in the second half from the previous year.

  Firms' judgment on current business conditions is almost flat, while cautiousness can be seen in some areas. The Tankan (September survey) revealed that firms' judgment on current business conditions was almost flat for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of December, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), current and prospective business conditions rose.

  The number of corporate bankruptcies is almost flat

The employment situation is improving.

  The employment situation is improving. The total unemployment rate was 3.0% in September, 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 increasing. The number of new job offers is almost flat. The effective ratio of job offers to applicants is on an upward trend. Overtime hours worked in the manufacturing industry are almost flat.

  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 have been flat recently. Consumer prices are flat.

  Producer prices have been flat recently.

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

  According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 73.8% in October, a decrease of 1.0% point 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, but they are expected to remain flat for the time being.

As for stock prices, after declining from the 17,300-yen level to the 16,200-yen level, the Nikkei Stock Average rose to the 18,100-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 104-yen level to the 101-yen level, moved in the direction of depreciation to the 110-yen level.

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