Monthly Economic ReportExecutive Summary( May 2009 )
(Assessment of the current state of the Japanese economy)
While the economy is in a difficult situation, the tempo of worsening has become moderate.
- * Exports and industrial production are nearing the bottom.
- * Corporate profits are decreasing very substantially and business investment is decreasing.
- * The employment situation, which is worsening rapidly, is severe.
- * Private consumption is decreasing moderately.
As for short-term prospects, with worsening employment situation, the economy is likely to remain severe for the time being. However, it is expected that the economy is supported by the improvement in external economic conditions, the reduction of adjustment pressure on inventory and the effects of the policy packages. On the other hand, there remains fear that the employment situation will worsen further due to extremely low level of production activities. Moreover, attention should be given to the risks that the economy is depressed by the influence of global financial crisis and concerns over 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. To implement the "Policy Package to Address Economic Crisis", the Government makes an effort to be approved by the Diet of the first supplementary budget for FY2009 budget and related bill. 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.
Detailed explanations
1.Demand trends such as consumption and investment
Real GDP (gross domestic product) in the January-March quarter of 2009 decreased by 4.0% on a quarterly basis (at an annual rate of 15.2%), posting negative growth for the fourth consecutive quarter. Nominal GDP decreased by 2.9%, posting negative growth for the fourth consecutive quarter.
Private consumption is decreasing moderately.
Private consumption is decreasing moderately. As for consumer confidence, a pickup has been seen recently, though remaining at low levels. Income is decreasing moderately. 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.), increased in March in comparison to February.
As for short-term prospects, weak movements are expected to continue for the time being due to worsened employment and income situations. We should also closely monitor the influence of Influenza A (H1N1) problem.
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 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 for the time being due to worsened employment and income situations.
Public investment has shown steady undertone due to the effect of the supplementary budget for fiscal 2008.
Public investment has shown steady undertone due to the effect of the supplementary budget for fiscal 2008.
The amount of contracted public works and public works orders received during the January-March quarter of 2009 were higher than in 2008. The amount of contracted public works in April 2009 were higher than in 2008.
As for short-term prospects, a strong trend is expected due to the execution of related budgets.
Exports are nearing the bottom. Imports are decreasing. The deficits of the trade and services accounts are decreasing.
Exports are nearing the bottom. By region, exports to Asia have shown a pickup trend. Both exports to the U.S. and the EU are decreasing. As for short-term prospects, it is expected that exports are supported by worldwide inventory adjustment progresses and production of economic stimulus measures effects by China, etc.
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 productionis nearing the bottom.
Industrial production is nearing the bottom since exports are nearing the bottom and downward pressure on production from inventory adjustment is decreasing.
As for short-term prospects, it is expected that production is picking up for the time being since inventory adjustment progresses. Also, the Survey of Production Forecast expects an increase both in April and May.
Corporate profits are decreasing very substantially. Firms' judgment on current business conditions is deteriorating very substantially. The number of bankrupt companies is increasing at a slower pace.
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 at a slower pace.
The employment situation, which is worsening rapidly, is severe.
The employment situation, which is worsening rapidly, is severe.
The total unemployment rate, which has been increasing, has risen by 0.4% from the previous month to 4.8% in March. The number of the unemployed people has increased and the number of employed people has decreased.
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 decreasing. Overtime hours worked in the manufacturing industry have been decreasing.
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 declining from the 8,900 yen level to the 8,400 yen level, the Nikkei Stock Average rose to the 9,400 yen level. Thereafter, it is moving at the 9,200 yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 98 yen level to the 99 yen level, and thereafter it is moving in the direction of appreciation to the 94 yen level.