Monthly Economic ReportExecutive Summary( March 2000 )
JAPANESE ECONOMY
1. OVERVIEW
Recent economic trends in Japan reveal that personal consumption has recovered from a decline at the end of last year, but it is not yet in an increasing trend. This is because income remains sluggish. Housing construction was buoyant in the recent past, partly because of temporary factors, although it had been slightly decreasing. The decrease in investment in plant and equipment is coming to an end, and recovery is seen in more industries.
As for public works, the pace of implementation is lower than it was a year ago, but new starts reflect the effects of the second supplementary budget, etc. Exports, especially those to Asia, are increasing.
Inventory adjustments are almost over, and industrial production keeps gradually increasing.
The employment situation remains severe, with the unemployment ratio staying at a high level, despite increases in overtime hours worked and in job offers.
Corporate profits are improving. Corporate confidence has further improved, although it remains at a low level.
The Japanese economy has not yet got out of the severe situation, as the recovery of aggregate demand remains weak. However, activities continue to improve moderately, through the influence of various policy measures and of the Asian economic recovery. With positive corporate activities beginning to be observed, movements toward autonomous recovery have begun to appear gradually.
The Government aims to realize a smooth baton pass toward a full-scale recovery from public to private demand and to establish a new solid foundation for economic development in the 21st century. From this viewpoint, the
Government will strongly promote measures, especially those in "The Policy Measures for Economic Rebirth."
2. EVALUATION OF INDIVIDUAL INDICATORS
The Japanese economy, in terms of demand, shows that personal consumption has recovered from a decline at the end of last year, but it is not yet in an increasing trend. This is because income remains sluggish. Housing construction was buoyant in the recent past, partly because of temporary factors, although it had been slightly decreasing. The decrease in investment in plant and equipment is coming to an end, and recovery is seen in more industries. As for public works, the pace of implementation is lower than it was a year ago, but new starts reflect the effects of the second supplementary budget, etc.
Real gross domestic product for October-December 1999 (preliminary report) decreased 1.4% (or at an annualized 5.5%) from the preceding quarter, of which the contribution made by domestic demand was minus 1.0%.
In industry, inventory adjustments are almost complete, and industrial production keeps gradually increasing. Corporate profits are improving. Corporate confidence has further improved, although it remains at a low level. The number of bankruptcies remains almost at the same level.
The employment situation remains severe, with the unemployment ratio staying at a high level, despite increases in overtime hours worked and in job offers.
Exports and imports, especially those to and from Asia, are increasing. As for the balance of international payments, surpluses registered in the trade and service account are decreasing gradually as a trend. The exchange rate of the yen against the U.S. dollar (Interbank spot central rate) depreciated to the 111 level in late February but ended the month at the 110 level.
Reviewing price movements, domestic wholesale prices remain almost at the same level, while consumer prices remain stable.
Taking a look at the recent financial situation, short-term interest rates stayed the same from February to early March. Long-term interest rates rose slightly in the beginning of February, and then remained constant until early in March. The money supply (M2+CDs) increased 2.1% year on year in February. Although the feeling of stringent corporate financing has been mitigated, lending by financial institutions remains stagnant.
3. OVERSEAS ECONOMY
The U.S. economy continues to expand, although its future course is uncertain. The October-December real GDP posted an annual growth rate of 6.9% (preliminary) over the previous quarter, after increasing 5.7% in the July-September quarter. Personal spending is increasing. Capital investment has slowed down in reaction to the sharp increase in the July-September quarter. The growth in housing investment has been slackening. Industrial production (based on the composite index) is increasing. Employment is rising. Prices are generally stable. The trade deficit for goods (on the basis of the international balance of payments) is widening. Long-term interest rates (30-year Treasury bonds) were in a downward trend overall in February. Stock prices (Dow Jones Industrial Average) also experienced a downward trend.
In Western Europe, the French and the U.K. economies are expanding, while the German economy is also expanding, albeit gradually. Industrial production is rising in Germany and France but is slowing down in the U.K. The unemployment rates are declining slightly in Germany and France (although they are still at a high level), and is declining in the U.K. Prices are generally stable in Germany, although import prices are rising. Prices are generally stable in France and stable in the U.K.
Turning to East Asia, the pace of economic growth is slowing in China, and prices are declining. Chinese exports are rising. The South Korean economy is expanding. South Korean trade, both exports and imports, are rising sharply.
As for movements in the international currency market in February, the U.S. dollar (effective exchange rate) moved slightly higher.
As for movements in the international commodity market in February, the CRB commodity futures index rose to 215 points early in February, but was caught in a downward trend later on in the month. The spot crude oil price (North Sea Brent) was in an upward trend early in the month until it fell below the 27-dollar-per-barrel level before rising again to the level of 28.50 dollars for barrel at the end of the month.