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Monthly Economic ReportExecutive Summary( Dec 2017 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery.

  • Private consumption is picking up moderately.
  • Business investment is increasing moderately.
  • Exports are picking up.
  • Industrial production is increasing moderately.
  • Corporate profits are improving. Firms' judgment on current business conditions is improving.
  • The employment situation is improving.
  • Consumer prices are flat.

  Concerning short-term prospects, the economy is expected to recover, 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 and the restoration and reconstruction from the 2016 Kumamoto Earthquake. To this end, the Government steadily implements the "Basic Policies for Economic and Fiscal Management and Reform 2017", the "Growth Strategy 2017", the "Regulatory Reform Work Plan", and the "Basic Policies for Overcoming Population Decline and Vitalizing Local Economy in Japan 2017", and the "Japan's Plan for the Dynamic Engagement of All Citizens". Moreover, in order to tackle the enormous challenge of the declining birthrate and aging population by promoting Supply System Innovation and Human Resources Development as two wheels of a cart, the Government will steadily implements the "New Enomonic Policy Package" deicided on December 8th. In addition, the Government will compile the FY2017 supplementary budget to properly deal with additional fiscal demand including disaster response. About work style reform, based on the "The action Plan for the Realization of Work Style Reform" decided in March, the Government will promptly try to rivise the Act regarding establishing a Sophisticated Professional System and revising the Discretionary Working System for Management-related Work, in addition to submit bills to the Diet at an early date.
  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.
  The Government decided the following actions.
  • "Basic Principles of FY2018 Budget Formulation" (December 8th, Cabinet Decision)
  • "Fiscal 2018 Economic Outlook and Basic Stance for Economic and Fiscal Management" (December 19th, Approval of Cabinet)

  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 picking up moderately.

  Private consumption is picking up moderately. Real wage income of employees is increasing moderately. Consumer confidence 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 Shipment's, etc.), increased by 0.1% in October 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 increasing moderately.

  Business investment is increasing moderately. The Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey) show that business investment increased in the July-September quarter of 2017 by 1.0% from the previous quarter after decreasing in the April-June quarter of 2017 by 2.0%. By industry, business investment increased for manufacturers by 0.5% from the previous quarter, and increased for non-manufacturers by 1.3%. Capital Goods Shipments and Imports, supply-side statistics, are picking up.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (December survey) and the Business Outlook Survey (October-December survey), planned business investment for all industries in fiscal year 2017 is expected to increase. The figures for Orders Recieved 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 and actions in growth sectors.

Housing construction has been in a weak tone recently.

  Housing construction has been in a weak tone recently. Construction of owned houses is in a weak tone. Construction of houses for rent has been in a weak tone recently. Construction of houses for sale is almost flat. Total number of sales of condominiums in the Tokyo metropolitan area is almost flat.

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

Public investment holds firm.

  Public investment holds firm with a high level of public construction works remained, the amount of public construction completed in October decreased by 0.6% from the previous month, the amount of contracted public works in November increased by 11.9% from the previous month, and the amount of public works orders received in October increased by 22.1% from the previous year.

  As for short-term prospects, public investment is expected to show steady performance due to the execution of related budgets.

Exports are picking up. Imports show movements of picking up. The surplus in the balance of goods and services is on an increasing trend.

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

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

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

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


2. Corporate activities and employment

Industrial production is increasing moderately.

  Industrial production is increasing moderately. The Indices of Industrial Production increased by 0.5% from the previous month in October. The Indices of Industrial Inventories increased by 3.2% from the previous month in October. The Survey of Production Forecast in Manufacturing expects an increase of 2.8% in November, and an increase of 3.5% in December.

  By industry, transport equipment is picking up. General-purpose, production and business oriented machinery is increasing. Electronic parts and devices are increasing moderately.

  As for short-term prospects, production is expected to continue to increase moderately reflecting the moderate recovery of overseas economies.

Corporate profits are improving. Firms' judgment on current business conditions is improving. The number of corporate bankruptcies is almost flat.

  Corporate profits are improving. According to the Quarterly Financial Statements Statistics of Corporations by Industly (July-September survey), corporate profits during the July-September quarter of 2017 increased by 5.5% from the previous year and decreased by 1.5% from the previous quarter. By industry, manufacturers saw an increase of 44.0% in corporate profits from the previous year, and non-manufacturers saw a decrease of 9.5%. By size of company, large and medium-sized companies saw an increase of 3.4%, and small companies saw an increase of 12.2%. According to the BOJ Tankan (December survey), in fiscal year 2017, sales are expected to increase by 4.3% in the first half of the year, and are expected to increase by 1.9% in the second half from the previous year. Current profits are expected to increase by 22.0% in the first half, and decrease by 9.5% in the second half from the previous year.

  Firms' judgment on current business conditions is improving. The Tankan (December survey) revealed that firms' judgment on current business conditions has improved for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of March, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (November survey), the assessment of current and prospective business conditions declined.

  The number of corporate bankruptcies is almost flat.

The employment situation is improving.

  The employment situation is improving. The total unemployment rate was 2.8% in October, the same level as the previous month. The labor force, the number of employed persons, and the number of unemployed persons decreased.

  The number of employees has been increasing. The number of new job offers has been increasing. The effective ratio of job offers to applicants is increasing. Overtime hours worked in the manufacturing industry have been increasing recently.

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

  According to the BOJ tankan (December survey), firms' judgment on current employment conditions shows that the sense of a labor shortage is becoming stronger.

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


3. Prices and the financial market

Producer prices are rising moderately. Consumer prices are flat.

  Producer prices are rising moderately.

  Consumer prices, in terms of general, excluding fresh food and energy, are flat.

  According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices, was 78.6% in November, an increase of 1.1% points from the previous month.

  As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise moderately, but they are expected to remain flat for the time being.

As for stock prices, after declining from the 22,500-yen level to the 22,100-yen level, the Nikkei Stock Average rose to the 22,800-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 111-yen level to the 112-yen level.

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