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Monthly Economic ReportExecutive Summary( May 2017 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is on a moderate recovery, while delayed improvement in part can be seen.

  • Private consumption remains in pickup as a whole.
  • Business investment shows movements of picking up.
  • Exports is picking up.
  • Industrial production is picking up.
  • Corporate profits is 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. To this end, the Government will decide the "Basic Policies for Economic and Fiscal Management and Reform 2017(provisional)", the "Japan Revitalization Strategy 2017(provisional)", the "Regulatory Reform Work Plan(provisional)", and the "Basic Policies for Overcoming Population Decline and Vitalizing Local Economy in Japan 2017(provisional)". In addition, the Government steadily implements the "Japan's Plan for the Dynamic Engagement of All Citizens". About work style reform, based on the "The action Plan for the Realization of Work Style Reform" decided in March, the Government will submit bills to the Diet at an early date. And the government 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. The Government also implements the FY2017 budget swiftly and steadily.
   Utilizing supplementary budgets 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 January-March quarter of 2017 increased by 0.5% on a quarterly basis (at an annual rate of 2.2%), posting positive growth for the fifth consecutive quarter. Nominal GDP decreased by 0.0% on a quarterly basis, posting negative growth for the first time in five quarters.

Private consumption remains in pickup as a whole.

  Private consumption remains in pickup as a whole. 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 Shipments, etc.), decreased by 0.1% in March 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 shows movements of picking up.

  Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (October-Deceember survey) show that business investment increased in the October-Deceember quarter of 2016 by 3.5% from the previous quarter after decreasing in the July-September quarter of 2016 by 0.1%. By industry, business investment decreased for manufacturers by 7.4% and for non-manufacturers by 1.3% from the previous quarter. Capital Goods Shipments and Imports, supply-side statistics, appear to be pausing.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (March 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 (January-March survey), planned business investment for all industries in fiscal year 2016 is expected to increase. In addition, according to the two surveys, the expected increase of planned business investment in fiscal year 2017 (year on year) is greater than the expected increase in fiscal year 2016 in the same quarter of the year. Accordig to Tankan, corporations' sense of excess capacity is improving. 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.

Housing construction is in a weak tone.

  Housing construction is in a weak tone. Construction of owned houses and houses for sale is almost flat. Construction of houses for rent has been flat recently while weakness remains in some areas. 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 remain in a weak tone for the time being.

Public investment holds firm.

  Public investment holds firm. The amount of public construction completed in March increased by 0.6% from the previous month, the amount of contracted public works in April increased by 5.9% from the previous month, and the amount of public works orders received in March increased by 5.2% from the previous year.

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

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

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

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

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


2. Corporate activities and employment

Industrial production is picking up.

  Industrial production is picking up. The Indices of Industrial Production decreased by 1.9% from the previous month in March. The Indices of Industrial Inventories increased by 1.5% from the previous month in March. The Survey of Production Forecast in Manufacturing expects an increase of 8.9% in April, and a decrease of 3.7% in May.

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

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

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

  Corporate profits is improving. During the January-March quarter of 2017, the current profits of the listed companies increased from the previous year both for manufacturers and non-manufacturers. According to the BOJ Tankan (March survey), in fiscal year 2017, sales are expected to increase by 1.7% in the first half of the year, and are expected to increase by 1.0% in the second half from the previous year. Current profits are expected to decrease by 1.1% in the first half, and decrease by 1.1% in the second half from the previous year.

  Firms' judgment on current business conditions is improving. The Tankan (March 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 June, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (March survey), the assessment of 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 2.8% in March, the same level as the previous month. The labor force and the number of employed persons increased while the number of unemployed persons all decreased.

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

  As for the movement of wages, contractual cash earnings have been picking up recently. 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 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 78.9% in April, an increase of 7.4% 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 rising from the 18,600-yen level to the 19,900-yen level, the Nikkei Stock Average declined to the 19,600-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 109-yen level to the 114-yen level, moved in the direction of appreciation to the 111-yen level.

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