Monthly Economic ReportExecutive Summary( April 2010 )
(Assessment of the current state of the Japanese economy)
Although the economy has been picking up steadily, it is only weakly self-sustaining and remains in a difficult situation such as a high unemployment rate.
- * Exports are increasing moderately. Industrial production is picking up.
- * Corporate profits are improving. Business investment is starting to level off.
- * Firms' judgment on current business conditions is improving. However, small and medium-sized enterprises are cautious about the immediate future.
- * While the employment situation remains severe, movements of an incipient recovery can be seen recently.
- * Private consumption is picking up.
- * Recent price developments show that the Japanese economy is in a mild deflationary phase.
As for short-term prospects, although some severe aspects remain in the employment situation, the economy is expected to pick up as corporate profits improve, reflecting improvement in overseas economies and the effects of policy measures including the Emergency Economic Measures. On the other hand, attention should be given to the risks that the economy is depressed by a possible slowdown in overseas economies and the influence of deflation. It should also be noted that there is still concern that the employment situation could deteriorate.
(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. Following the approval by the Diet of the FY2010 budget, steady disbursement will be made.The government promotes "Emergency Economic Countermeasures for Future Growth and Security". The Government implements specification of the "New Growth Strategy(Basic Policies)" and ensures policy realization.
The government and the Bank of Japan will work together to ensure overcoming deflation and recovering economy by conducting aggressive and comprehensive measures. The government expects the Bank of Japan to support the economy through appropriate and flexible monetary policy management in line with such government measures. On March 17th, the Bank of Japan decided to increase the amount of funds to be provided through the fixed-rate funds-supplying operation against pooled collateral.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption is picking up.
Private consumption is picking up due to the effects of policy packages. Consumer confidence remains almost flat. Real income of employees is starting to level off. 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, private consumption is expected to show steady movement, reflecting the effects of the policy packages, while deteriorating employment and income situations are being brought under control.
Business investment is starting to level off.
Business investment is starting to level off. The Quarterly Financial Statements Statistics of Corporations by Industry, demand-side statistics, shows that business investment decreased both in the July-September quarter of 2009 and the October-December quarter of 2009. Capital goods Shipments, supply-side statistics, are picking up.
According to the Bank of Japan short-term business sentiment survey (tankan), planned business investment in fiscal 2010 is expected to decrease for the third consecutive year, with the pace of decrease slowing, for both large manufacturers and large non-manufacturers.
As for short-term prospects, business investment is expected to remain at low levels for the time being with the strong sense of excessive capital stock.
Housing construction is picking up.
Housing construction is picking up. Construction of owned houses and houses for rent is picking up.
As for short-term prospects, housing construction is expected to show steady movement reflecting the effects of the policy packages, while deteriorating employment and income situations are being brought under control.
Public investment has been in a weak tone recently.
Public investment has been in a weak tone recently.
The amounts of contracted public works and public works orders received in February 2010 were lower than in the previous year.
As for short-term prospects, public investment is expected to be generally sluggish in view of the budget situations of the national and local governments.
Exports are increasing moderately. Imports are picking up moderately. The surplus in the trade and services balance has been flat.
Exports are increasing moderately. By region, exports to Asia are increasing moderately. Exports to both the U.S. and the EU are picking up. As for short-term prospects, it is expected that exports are continuously showing an upward trend for the time being since the world economy is picking up moderately.
Imports are picking up moderately. By region, imports from both Asia and the U.S. are increasing moderately. Imports from the EU are picking up.
As for the international balance of payments, the surplus in the trade account has been flat while both export and import values have increased. The deficit in the services account has been flat, thus leading the surplus of the trade and services balance to be flat.
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 the upward trend of exports. Also, the Survey of Production Forecast expects an increase in March and a decrease in April.
Corporate profits are improving. Firms' judgment on current business conditions shows improvement. However, small enterprises are cautious about the immediate future. The number of bankrupt companies has been almost flat.
According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits during the October-December quarter of 2009 increased by 102.2% in comparison with the previous year, thus an increase for the first time in ten quarters, due to the fact that cost reduction progressed and the amount of sales increased. By type of industry, profits of the manufacturing industry increased by 864.7% and those of the non-manufacturing industry increased by 38.1%. According to the BOJ Tankan, fiscal 2010 sales are expected to post an increase for the first time in three years, and fiscal 2010 current profits are expected to post an increase for the first time in four years.
The BOJ Tankan shows firms' judgment on current business conditions as having improved. Both large manufacturers and large non-manufacturers' judgments on current business conditions improved for the fourth consecutive quarter. Small manufacturers and small non-manufacturers' judgments on current business conditions improved for the third consecutive quarter. However, small enterprises, mainly in the construction industry, are cautious about the immediate future.
The number of bankrupt companies has been almost flat.
The employment situation still remains severe, while movements of an incipient recovery can be seen recently.
The employment situation still remains severe, while movements of an incipient recovery can be seen recently.The total unemployment rate hovered at a high 4.9% in February, the same level as the previous month. The total unemployment rate of those aged 15 to 24 was 8.7%, the same level as the previous month.
The number of new job offers and the effective ratio of job offers to applicants have been showing movements of picking up. The number of employees has been showing movements of picking up recently. Overtime hours worked in the manufacturing industry have increased, reflecting pickup in production.
As for the movement of wages, contractual cash earnings have been showing movements of picking up, but the total amount of cash earnings has been on a declining trend.
3.Prices and the financial market
Domestic corporate goods prices are rising at a moderate pace recently. Consumer prices continue to decline moderately.
Domestic corporate goods prices are rising at a moderate pace recently.
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 that the decline in prices is continuing.
As for stock prices, after rising from the 10,700-yen level to the 11,300-yen level, the Nikkei Stock Average is moving at the 11,200-yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 90-yen level to the 94-yen level, and thereafter it is moving at the 93-yen level.