Monthly Economic ReportExecutive Summary( November 2000 )
JAPANESE ECONOMY
1. OVERVIEW
Although the Japanese economy has not yet got out of the severe situation with meager improvements in the household sector, activities on the whole continue to rise modestly. The strength is seen mainly in the corporate sector, where autonomous nature of the recovery has become increasing evident.
Personal consumption remains broadly flat while household income appears to be improving. Housing investment has stayed unchanged as a whole, with a decline in condominium construction offset by a rise in owner-occupied single houses. Business investment continues to rise, led by buoyant outlays by specific industries such as electric machinery. Public investment remains lower than in a year earlier. Export volume as a whole slow down, with exports to the United States and Western Europe faltering, while those to Asia remain resilient.
Industrial production continues to rise steadily.
Although the slack in the labour market has diminished little as exemplified by the rather high unemployment rate, improvements continue to be seen in the growing number of job offers and in rising overtime hours worked.
Corporate profits continue to rise markedly. Business confidence has improved as a whole, although it remains low in some sectors. On the other hand, the number of business failures has stayed somewhat high, with gross debt of failed firms rising.
The Government aims to sustain domestic activities so as to establish an autonomous recovery path, and to make bold reforms of the economic structure for the 21st century. The Government, for this sake, has decided "A Policy Package for New Economic Development toward the Rebirth of Japan" on October the 19th to materialize the Plan for the Rebirth of Japan, and is to enact the measures specified in the package.
2. EVALUATION OF INDIVIDUAL INDICATORS
The Japanese economy, in terms of demand, shows that personal consumption remains broadly flat while household income appears to be improving. Housing investment has stayed unchanged as a whole, with a decline in condominium construction offset by a rise in owner-occupied single houses. Business investment continues to rise, led by buoyant outlays by specific industries such as electric machinery. Public investment remains lower than in a year earlier.
Industrial production continues to rise steadily. Corporate profits continue to rise markedly. Business confidence has improved as a whole, although it remains low in some sectors. On the other hand, the number of business failures has stayed somewhat high, with the gross debt of failed firms rising.
Although the slack in the labour market has diminished little as exemplified by the rather high unemployment rate, improvements continue to be seen in the growing number of job offers and in rising overtime hours worked.
Export volume as a whole slowed down, with exports to the United States and Western Europe faltering, while those to Asia remained resilient. Imports are rising moderately. As for the balance of international payments, surpluses registered in the trade and service account remained at almost the same level. The exchange rate of the yen against the U.S. dollar (interbank spot central rate) moved between the 107 and 109 levels in October.
Reviewing price movements, domestic wholesale prices remain almost at the same level, while consumer prices are somewhat bearish.
Taking a look at the recent financial situation, both short- and long-term interest rates remained almost flat. Stock prices fell sharply in October. The money supply (M2+CDs) showed a year-on-year increase of 1.9%. Although the stringent feeling of corporate finance has been easing as a trend, lending by financial institutions still remain stagnant.
3. OVERSEAS ECONOMY
The U.S. economy is stable after the speed of its expansion slowed down. The July-September GDP posted an annual growth rate of 2.7% (advance), after increasing 5.6% in the April-June quarter. Personal consumption is increasing. Capital spending is increasing. Housing investment is slowing down. Industrial production (based on the composite index) is increasing. Employment is rising, while prices are stable in general. The trade deficit for goods (on the basis of international balance of payments) still remains high. Long-term interest rates (10-year Treasury bonds) rose in late October, after remaining on a downward trend earlier in the month, but ended the month lower. Stock prices (Dow Jones industrial average) rose in late October, after falling sharply, and ended the month higher.
In Western Europe, the German, French and U.K. economies are expanding. Industrial production is rising in Germany and the U.K., and leveling off in France. Unemployment rates have declined in Germany and France, although they still remain at high levels. The unemployment rate in the U.K. has remained at a low level. The rate of increase in consumer prices is rising slightly in Germany and France due to higher energy prices. Prices are stable in the U.K.
Turning to East Asia, the pace of economic growth has slightly increased in China and prices are stable. Both exports and imports are rising sharply in China. The South Korean economy is continuing to expand, although it is slowing down compared with the rapid recovery seen after the crisis. South Korean trade, both exports and imports, are rising sharply.
As for movements in the international currency market in October, the U.S. dollar (effective exchange rate) moved generally higher.
As for movements in the international commodity market in October, the CRB commodity futures index rose early in the month but then moved in a downward trend. The spot crude oil price (North Sea Brent) rose above the level of 33 dollars per barrel in the middle of the month and then hovered around 31 dollars.