Assessment of the Japanese Economy

The pace of economic recovery has become more moderate.

Reflecting the slowdown of the U.S. economy,Japanese exports have weakened, with the result that the rise in industrial production has become more modest.

Severeness still remains in the economy, with private consumption remaining broadly flat, and the unemployment rate stubbornly high.

At the same time, the move towards self-sustained recovery has continued, as shown by rising corporate profits and business investment.

Short-term prospects involve some concerns, such as the U.S. economic slowdown.


The Government aims to sustain domestic activities to make sure that the economy establishes an autonomous recovery path, and to make bold reforms of economic structure for the 21st century.

In this vein, the Cabinet decided, on the January 31,"Economic Outlook and Basic Policy Stance on Economic Management for FY 2001", which contains an official forecast of 1.7 per cent real GDP growth for Fiscal 2001, and on the same day, submitted the Draft Budget for fiscal 2001 to the Diet.

Along with the steady implementation of the Revised Budget for Fiscal 2000,the Government would make its endeavor for an early approval of the Budget for Fiscal 2001.

1.Demand trends of consumption, investment, etc.

Personal consumption remains broadly flat. Regular income is recovering but the growth of year-end bonuses was slow.

Business investment continues to rise,led by buoyant outlays by manufacturing firms.

Housing investment remains broadly flat.

Public investment is sluggish as a whole, but orders received for public works have been higher than year-earlier levels in recent months.

Exportshave weakened. Imports are increasing. The surplus in the trade and service account is decreasing.

2.Corporate activity and employment situation

Growth in industrial production has slowed down.

Corporate profits are recovering markedly, but the recovery pace has slowed down somewhat. Improvement in business confidence shows signs of a standstill.

The number of business failures has remained somewhat high.

Although the employment situation remains severe with the unemployment rate staying at a high level, there have been improvements such as an increase in job offers.

3.Prices and monetary situation

Domestic wholesale prices are declining slightly. Consumer prices are declining slightly.

As to the financial situation,stock prices have remained in a downward trend since the spring of last year and now stay at the lowest level of last year.

4.Overseas economy

The U.S. economy, which began to slow down in the middle of last year, has slowed down further. The pace of economic growth is slowing in Asia.