Monthly Economic ReportExecutive Summary( November 2009 )
(Assessment of the current state of the Japanese economy)
Although the economy has been picking up, it is short of autonomous factors and remains in a difficult situation such as a high unemployment rate.
- * Exports are increasing, mainly to Asia. Industrial production is picking up.
- * Corporate profits are decreasing substantially, but the downward pace has become moderate. Business investment is starting to level off.
- * Although firms' judgment on current business conditions remains in a difficult situation, it continues to show movements of picking up as a whole. However, the pace of pickup for small and medium-sized enterprises is slow.
- * The employment situation remains severe.
- * Private consumption continues to show movements of picking up.
- * Recent price developments show that the Japanese economy is in a mild deflationary phase.
As for short-term prospects, although the employment situation remains severe, the economy is expected to pick up reflecting improvement in overseas economies. On the other hand, attention should be given to the risks that the economy is depressed by a further worsening of the employment situation, concerns over slowdown in overseas economies, and the influence of deflation and fluctuations in the financial and capital markets.
(Policy stance)
The government implements policy management to realize stable economic growth mainly on the domestic demand that puts Japanese economy on the autonomous recovery path by expanding individual consumption by support of households and by producing industry and employment in a new field. The government promotes "Measures of Emergency Employment " and puts together economic measures to implement rapid and emphatic action about employment and environment and to support economy.
The government expects the Bank of Japan to conduct appropriate and flexible monetary policy under close contact with the government to facilitate the return of the Japanese economy to a sustainable growth path with price stability.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption continues to show movements of picking up.
Private consumption continues to show movements of picking up due to the effects of the policy packages. As for consumer confidence, a pickup has been seen. Real income of employees is on a declining trend. 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 September in comparison to August.
As for short-term prospects, it is expected that private consumption is supported by the effects of the policy packages while a pickup has been seen in consumer confidence. However, we should closely monitor severe employment and income situations and the effects of the epidemic of Influenza A (H1N1).
Business investment is starting to level off.
Business investment is starting to level off. The Quarterly Financial Statements Statistics of Corporations by Industry, which is a demand-side statistic, shows that business investment decreased both in the January-March quarter of 2009 and the April-June quarter of 2009. Capital goods Shipments, which are supply-side statistics, are showing movements of picking up.
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, business investment is expected to be sluggish for the time being while corporate profits decrease substantially and uncertainty about the economic outlook, shown by factors such as downside risk of the global economy, is high.
Housing construction is decreasing moderately.
Housing construction is decreasing moderately. Construction of owned houses and houses for sale is nearing the bottom. Construction of houses for rent is decreasing.
As for short-term prospects, weak movements are likely to continue for the time being due to severe employment and income situations while the economic policy packages are expected to be effective.
Public investment has shown steady performance.
Public investment has shown steady performance.
The amount of contracted public works in October 2009 and public works orders received in September 2009 were higher than in 2008.
As for short-term prospects, an impact coming from the review of budget and projects should be determined.
Exports are increasing, mainly to Asia. Imports are picking up. The surplus in the trade and services balance has been increasing.
Exports are increasing, mainly to Asia. By region, exports to Asia are substantially increasing. Both exports to the U.S. and the EU are showing movements of picking up. As for short-term prospects, it is expected that exports are continuously showing an upward trend for the time being due to worldwide inventory adjustment progresses and spread of economic recovery from Asia, etc.
Imports are picking up. By region, imports from Asia are increasing. Both imports from the U.S. and the EU are showing movements of picking up.
As for the international balance of payments, the surplus in the trade account has been increasing while export values have increased and import values have increased moderately. The deficit in the services account has been flat, thus leading the surplus of the trade and services balance to increase.
2.Corporate activities and employment
Industrial production is picking up.
Industrial production is picking up.
As for short-term prospects, production is expected to continue to pick up for the time being, reflecting upward trend of exports. Also, the Survey of Production Forecast expects an increase both in October and November.
Corporate profits are decreasing substantially, but the downward pace has become moderate. Although Firms' judgment on current business conditions remains in a difficult situation, it continues to show movements of picking up as a whole. However, the pace of pickup for small enterprises is slow. The number of bankrupt companies is decreasing moderately.
According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits during the April-June quarter of 2009 decreased by 53.0% in comparison with the previous year, thus posting a decline for the eighth consecutive quarter, due to the fact that the amount of sales decreased. By type of industry, profits of the manufacturing industry decreased by 89.2% and those of the non-manufacturing industry decreased by 26.4%. 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 firms' judgment on current business conditions. Both large manufacturers' and large non-manufacturers' judgments on current business conditions improved for the second consecutive quarter. Small manufacturers' and small non-manufacturers' judgments on current business conditions improved for the first time in seven quarters and 11 quarters respectively.
The number of bankrupt companies is decreasing moderately.
The employment situationstill remains severe.
The employment situation still remains severe.The total unemployment rate has hovered at a high 5.3% in September, decreased by 0.2 percentage points from the previous month.
The number of new job offers has been showing movements of picking up recently. The effective ratio of job offers to applicants has been moving horizontally. The number of employees has been showing movements of picking up recently. Overtime hours worked in the manufacturing industry have increased, reflecting pickup of the production.
As for the movement of wages, contractual cash earnings are showing movements of picking up, but the total amount of cash earnings are on a declining trend.
3.Prices and the financial market
Domestic corporate goods prices have been flat. Consumer prices continue to decline moderately.
Domestic corporate goods prices have been flat.
Consumer prices, in terms of "general, excluding fresh food, petroleum products and other specific components" (referred to as "core core"), continue to decline moderately. As for short-term prospects, consumer prices (core core) are expected to remain on a moderate downward trend.Taken together, these movements show that the Japanese economy is in a mild deflationary phase in terms that the decline in prices is continuing.
As for stock prices, after rising from the 10,200 yen level to the 10,300 yen level, the Nikkei Stock Average decreased to the 9,600 yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 90 yen level to the 92 yen level, and thereafter it is moving in the direction of appreciation to the 89 yen level.