Monthly Economic ReportExecutive Summary( April 2009 )
(Assessment of the current state of the Japanese economy)
The economy is worsening rapidly while in a severe situation.
- * Exports are decreasing substantially. Industrial production is decreasing very substantially.
- * Corporate profits are decreasing very substantially and business investment is decreasing.
- * The employment situation is getting worse rapidly.
- * Private consumption is decreasing moderately.
As for short-term prospects, while the economy is likely to continue worsening for the time being, the tempo of worsening is expected to moderate as inventory adjustment progresses. However, there remains fear that extremely low level of production activities will lead to significant employment adjustment. Moreover, attention should be given to the risks that the economy would become severer due to the worsening global financial crisis and concerns over further slowdown in overseas economies.
(Policy stance)
The Government implements economic and fiscal policies by the three-stage consisted of economic measures in the near term, fiscal consolidation in the mid-term, and economic growth through reforms in the mid- to long-term. In the near term to implement economic measures in the first priority, the Government steadily implements economic measures of which business scale is about 75 trillion yen in all. In view of 1） preventing the economy from falling into a negative spiral, 2）securing employment and reducing the pain of the people, and 3）linking to the future growth reinforcement, the government published the "Policy Package to Address Economic Crisis" on April 10th of which national expenditure is around 15.4 trillion yen and total size is 56.8 trillion yen. Through these policy packages, we can expect the effectiveness that supports economy.
In view of domestic and external economic and financial situation, the Government expects that the Bank of Japan supports economy through suitable and flexible financial policy by sharing basic perspectives on macroeconomic management. The Bank of Japan decided to expand purchasing the national bond of long term on March 18th.
Detailed explanations
1.Demand trends such as consumption and investment
Private consumption is decreasing moderately.
Private consumption is decreasing moderately. As for consumer confidence, a deteriorating trend is being brought under control, but income has been weak. 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, etc.), decreased in February in comparison to January.
As for short-term prospects, the employment situation is getting worse rapidly and income has become weak, so weak movements are likely to continue for the time being.
Business investment is decreasing.
Business investment is decreasing. The Quarterly Financial Statements Statistics of Corporations by Industry, which is a demand-side statistic, shows that business investment decreased both in the July-September quarter of 2008 and the October-December quarter of 2008.
According to the Bank of Japan short-term business sentiment survey (tankan), planned business investment in fiscal 2009 is expected to decrease for the second consecutive year for both large manufacturers and large non-manufacturers.
As for short-term prospects, there is concern over further decrease as planned business investment is expected to decrease substantially while corporate profits decrease very substantially and uncertainty about the economic outlook, shown by factors such further downside risk of the global economy, is high.
Housing construction is decreasing.
Housing construction is decreasing. Construction of owned houses, houses for sale, and houses for rent is decreasing.
As for short-term prospects, the downward trend is expected to continue given that the employment situation is getting worse rapidly, income has been weak and condominium stock are at a high level.
Public investment has been generally sluggish, but the effect of the supplementary budget for fiscal 2008, etc. have been seen.
Public investment has been generally sluggish, but the effect of the supplementary budget for fiscal 2008, etc. have been seen.
Public works orders received during the January-March quarter of 2009 were higher than in 2008.
As for short-term prospects, we should closely monitor the execution of related budgets.
Exports are decreasing substantially. Imports are decreasing. The deficits of the trade and services accounts are decreasing.
Exports are decreasing substantially. By region, exports to Asia, the U.S., and the EU have all been decreasing substantially. As for short-term prospects, amid global economic slowdown, while the decreasing trends are likely to continue for the time being, the tempo of decrease in export is expected to moderate as worldwide inventory adjustment progresses.
Imports are decreasing. By region, imports from Asia, the EU and the U.S. are all decreasing.
As for the international balance of payments, the deficit in the trade account has been decreasing while both export and import values have decreased. The deficit in the services account has been flat, thus leading the deficits of the trade and services balance to decrease.
2.Corporate activities and employment
Industrial production is decreasing very substantially.
Industrial production is decreasing very substantially due to the decrease in business investments and the substantial decrease in exports.
As for short-term prospects, while demand is decreasing and the inventory ratio is increasing remarkably, the tempo of decrease in production is likely to moderate as inventory adjustment progresses. Also, the Survey of Production Forecast expects an increase both in March and April.
Corporate profits are decreasing very substantially. Firms' judgment on current business conditions is deteriorating very substantially. The number of bankrupt companies is increasing.
According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits (excluding financial holding companies) during the October-December quarter of 2008 decreased by 64.6% in comparison with the previous year, thus posting a decline for the sixth consecutive quarter, due to the fact that the amount of sales decreased. By type of industry, profits of the manufacturing industry decreased by 94.3% and those of the non-manufacturing industry decreased by 36.1%. According to the BOJ Tankan, fiscal 2009 sales are expected to post a decrease for the second consecutive year, and fiscal 2009 current profits are expected to post a decrease for the third consecutive year.
The BOJ Tankan shows that firms' judgment on current business conditions is deteriorating very substantially. Large manufacturers' judgment on current business conditions deteriorated for the sixth consecutive quarter, while that of large non-manufacturers deteriorated for the seventh consecutive quarter. Small manufacturers' judgment on current business conditions deteriorated for the fifth consecutive quarter; whereas that of small non-manufacturers deteriorated for the eighth consecutive quarter.
The number of bankrupt companies is increasing.
The employment situation is getting worse rapidly.
The employment situation is getting worse rapidly.
The total unemployment rate, which had been increasing, has increased by 0.3 percentage points from the previous month to 4.4% in February. The number of the unemployed person has increased and the number of employed person has decreased. The unemployment rate for those between ages 15 and 24 is increasing.
The number of new job offers has been decreasing substantially. The effective ratio of job offers to applicants has been declining substantially. The number of employees has been weakening. Overtime hours worked in the manufacturing industry have been decreasing substantially. Firms' judgment on current employees conditions showed that labor excess has increased substantially, particularly in manufacturing industry in March.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are decreasing.
3.Prices and the financial market
Domestic corporate goods prices have declined moderately. Consumer prices have been flat.
Domestic corporate goods prices have declined moderately.
Consumer prices, in terms of "general, excluding fresh food, petroleum products and other specific components" (referred to as "core core"), have been flat. As for short-term prospects, consumer prices (core core) are expected to remain broadly flat for the time being. However, attention should be given to downward pressure on prices, which may be a result of moderately decreasing private consumption.
As for stock prices, after rising from the 7,900 yen level to the 8,900 yen level, the Nikkei Stock Average is moving at the 8,700 yen level. The yen against the U.S. dollar moved in the direction of appreciation from the 98 yen level to the 95 yen level, and thereafter it moved in the direction of depreciation to the 100 yen level. Thereafter, it is moving at the 98 yen level.