Monthly Economic ReportExecutive Summary( September 2009 )
(Assessment of the current state of the Japanese economy)
The economy is showing movements of picking up recently while in a difficult situation such as a rise in the unemployment rate to an all-time high.
- * Exports and industrial production are picking up.
- * Corporate profits are decreasing substantially, but the downward pace has become moderate. Business investment is decreasing.
- * The employment situation is becoming increasingly severe.
- * Private consumption is showing movements of picking up recently.
As for short-term prospects, with worsening employment situation, the economy is likely to remain severe for the time being. However, the economy is expected to pick up reflecting completion of inventory adjustment, effects of the policy packages and improvement of external economic conditions. 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 continues to pursue its top priority of achieving economic recovery in the near term by steadily implementing the "Policy Package to Address Economic Crisis" and other measures. In addition, economic and fiscal policies will be conducted based on the "Basic Policies 2009 for Economic and Fiscal Reform: Reassurance, Vitality and Responsibility" that provides a roadmap for achieving three goals of reassurance, vitality and responsibility simultaneously.
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
Real GDP (gross domestic product) in the April-June quarter of 2009 increased by 0.9% on a quarterly basis (at an annual rate of 3.7%), posting positive growth for the first time in five quarters. Nominal GDP decreased by 0.2%, posting negative growth for the fifth consecutive quarter.
Private consumption is showing movements of picking up recently.
Private consumption is showing movements of picking up recently due to the effects of the policy packages. As for consumer confidence, a pickup has been seen, though remaining at low levels. Real income of employees 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 July in comparison to June.
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 worsened employment and income situations and the effects of the epidemic of Influenza A (H1N1).
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 January-March quarter of 2009 and the April-June quarter of 2009.
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 continuing decrease as planned business investment is expected to decrease substantially 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 is nearing the bottom. Construction of houses for sale and houses for rent is decreasing.
As for short-term prospects, weak movements are likely to continue for the time being due to worsened 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 and public works orders received during the April-June quarter of 2009 were higher than in 2008. The amount of contracted public works in July 2009 was higher than in 2008.
As for short-term prospects, a strong trend is expected due to the execution of related budgets.
Exports are picking up. Imports are showing movements of picking up. The surplus in the trade and services balance has been increasing.
Exports are picking up. By region, exports to Asia are 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 picking up for the time being due to worldwide inventory adjustment progresses and spread of economic recovery from Asia, etc.
Imports are showing movements of picking up. By region, imports from Asia are increasing. Imports from the U.S. are decreasing moderately. Imports from the EU are nearing the bottom.
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 been flat. 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 since exports are picking up and downward pressure on production from inventory adjustment is decreasing.
As for short-term prospects, production is expected to continue to pick up for the time being, reflecting completion of inventory adjustment and pickup of exports. Also, the Survey of Production Forecast expects an increase both in August and September.
Corporate profits are decreasing substantially, but the downward pace has become moderate. Firms' judgment on current business conditions continues to be in a difficult situation, but large enterprises' judgment is showing movements of picking up. The number of bankrupt companies has been almost flat.
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 that firms' judgment on current business conditions continues to be in a difficult situation, but large enterprises' judgment is showing movements of picking up. Both large manufacturers' and large non-manufacturers' judgments on current business conditions improved for the first time in 10 quarters. Small manufacturers' judgment on current business conditions was flat; whereas that of small non-manufacturers deteriorated for the ninth consecutive quarter.
The number of bankrupt companies has been almost flat.
The employment situation is becoming increasingly severe.
The total unemployment rate has risen by 0.3 percentage points from the previous month to match the all-time high of 5.7% in July. The number of unemployed persons has been increasing and the number of employed person has been decreasing. The total unemployment rate for those between ages 15 and 24 has been increasing.
The number of new job offers has been on a decreasing trend. The effective ratio of job offers to applicants has been further declining. The number of employees is on a declining trend. 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. The total amount of cash earnings have been decreasing substantially as special cash earnings including bonuses decreased substantially.
3.Prices and the financial market
Domestic corporate goods prices have been flat. Consumer prices have declined 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"), have declined moderately. As for short-term prospects, consumer prices (core core) are expected to remain on a moderate downward trend.
As for stock prices, after rising from the 10,400 yen level to the 10,600 yen level, the Nikkei Stock Average decreased to the 10,100 yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 95 yen level to the 96 yen level, and thereafter it is moving in the direction of appreciation to the 92 yen level.