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Monthly Economic ReportExecutive Summary( Sep 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 picking up.
  • Exports are picking up.
  • Industrial production is picking up.
  • 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, with regard to human resources development, the Government has set up the "Council for Designing 100-Year Life Society", which will advance discussion to compile an interim report by the end of this year, followed by a basic design scheduled for release in the first half of next year. 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. 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.
  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 picking up moderately.

  Private consumption is in 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 0.3% in July 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 (April-June survey) show that business investment decreased in the April-June quarter of 2017 by 2.8% from the previous quarter after increasing in the January-March quarter of 2017 by 0.9%. By industry, business investment decreased for manufacturers by 5.4% from the previous quarter, and decreased for non-manufacturers by 1.4%. Capital Goods Shipments and Imports, supply-side statistics, are picking up.

  According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (June survey) and the Business Outlook Survey (July-September 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, appear to be pausing.

  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 is flat.

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

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

Public investment shows steady performance.

  Public investment shows steady performance. The amount of public construction completed in July decreased by 0.7% from the previous month, the amount of contracted public works in August increased by 15.1% from the previous month, and the amount of public works orders received in July increased by 7.9% 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 almost flat.

  Exports are picking up. By region, exports to Asia are picking up. Exports to the U.S. and EU show movements of picking up. Exports to 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 almost flat.

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


2. Corporate activities and employment

Industrial production is picking up.

  Industrial production is picking up. The Indices of Industrial Production decreased by 0.8% from the previous month in July. The Indices of Industrial Inventories decreased by 1.1% from the previous month in July. The Survey of Production Forecast in Manufacturing expects an increase of 6.0% in August, and a decrease of 3.1% in September.

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

  As for short-term prospects, production is expected to continue to pick up mainly 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 (April-June survey), corporate profits during the April-June quarter of 2017 increased by 22.6% from the previous year and by 4.0% from the previous quarter. By industly, manufacturers saw an increase of 46.4% in corporate profits from the previous year, and non-manufacturers saw an increase of 12.0%. By size of company, large and medium-sized companies saw an increase of 19.7%, and small companies saw an increase of 32.2%. According to the BOJ Tankan (June survey), in fiscal year 2017, sales are expected to increase by 3.0% in the first half of the year, and are expected to increase by 1.1% in the second half from the previous year. Current profits are expected to decrease by 0.8% in the first half, and decrease by 7.3% in the second half from the previous year.

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

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

  As for the movement of wages, contractual cash earnings are picking up. 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 at a slower tempo. Consumer prices are flat.

  Producer prices are rising at a slower tempo.

  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 76.1% in August, an increase of 0.3% 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, the Nikkei Stock Average rose from the 19,300-yen level to the 20,300-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 108-yen level to the 112-yen level.

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