Monthly Economic ReportExecutive Summary( Sep 2013 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is on the way to recovery at a moderate pace.
- Exports show movements of picking up although its upward trend becomes moderate recently. Industrial production is increasing at a moderate pace.
- Corporate profits are improving, mainly among large firms. Business investment shows movements of picking up, mainly among non-manufacturing industries.
- Firms' judgment on current business conditions is improving.
- The employment situation is improving.
- Private consumption is on a trend of picking up.
- Recent price developments indicate that the deflation is ending.
Concerning short-term prospects, the recovery is expected to take hold as household income and business investment continue to be on upward trends, while exports pick up and the effects of the policies develop. However, slowing down of overseas economies is still downside risk of the Japanese economy.
(Policy stance)
The Government will make its utmost efforts to overcome deflation early and achieve the revitalization of the Japanese economy, in addition to accelerate the reconstruction from the Great Earthquake. To this end, the Government implements economic and fiscal policies based on the "Basic Policies for Economic and Fiscal Management and Reform" , and accelerates and also strengthens implementations of the "Japan Revitalization Strategy" .
The Government expects the Bank of Japan to achieve the price stability target of two percent at the earliest possible time.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption is on a trend of picking up.
Private consumption is on a trend of picking up. One of the factors behind this is that real income of employees and consumer confidence both hold firm. The Synthetic Consumption Index, which synthesizes demand-side statistics (Family Income and Expenditure Survey, etc.) and supply-side statistics (Indices of Industrial Producer’s Shipments, etc.), decreased by 0.1% in July in comparison to June, while it also decreased in terms of the three-month moving average.
Concerning short-term prospects, the recovery is expected to continue on a pickup trend, supported by the improvement of the employment and income situations.
Business investment shows movements of picking up, mainly among non-manufacturing industries.
Business investment shows movements of picking up, mainly among non-manufacturing industries. The Quarterly Financial Statements Statistics of Corporations by Industry, demand-side statistics, show that business investment increased in the April-June quarter of 2013 by 2.9% from the previous quarter, the third consecutive quarter of increase. By industry, business investment decreased for manufacturers by 0.6% from the previous quarter, and increased for non-manufacturers by 4.7% from the previous quarter. Capital Goods Shipments, supply-side statistics, have been showing further stability recently.
According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (June survey) by the Bank of Japan, planned business investment in fiscal year 2013 is expected to increase for the third consecutive year for manufacturers, and that for non-manufacturers is expected to decrease for the first time in two years, thus, for all industries, investment is expected to increase for the second consecutive year. According to the Business Outlook Survey by the Ministry of Finance and the Cabinet Office, planned business investment in fiscal year 2013 is expected to increase both for large manufacturers and large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are picking up recently.
As for short-term prospects, business investment is expected to pick up, reflecting the improvement of corporate profits and confidence, etc.
Housing construction is increasing.
Housing construction is increasing. Construction of owned houses and houses for rent is increasing. Construction of houses for sale is picking up.
The total number of sales of condominiums in the Tokyo metropolitan area is picking up.
As for short-term prospects, housing construction is expected to continue to be on an upward trend for the time being, supported by continuously lasting reconstruction demand and the improvement of the employment and income situations. However, the supply-demand situations of construction workers should be closely monitored.
Public investment has shown steady performance.
Public investment has shown steady performance. The amount of contracted public works in August 2013 and the amount of public works orders received in July 2013 increased by 7.9% and 16.8%, respectively from the previous year.
As for short-term prospects, public investment is expected to show steady movement due to the execution of related budgets.
Exports show movements of picking up although its upward trend becomes moderate recently. Imports have been flat. The deficits of the balance of goods and services have been almost flat.
Exports show movements of picking up although its upward trend becomes moderate recently. By region, Exports to Asia have been flat. Exports to the U.S. have been flat recently. Exports to EU show signs of picking up. As for short-term prospects, exports are expected to continue picking up, reflecting the steady overseas economies and the trend of exchange rate depreciation of the yen so far. However, it should be noted that there are risks of a downturn in overseas economies.
Imports have been flat. By region, imports from the U.S. show signs of picking up. Imports from Asia and EU have been flat. As for short-term prospects, imports are expected to pick up gradually.
The deficits of the balance of goods and services have been almost flat.
The deficit in the balance of trade in July increased, as export values decreased and import values increased. The deficit in services decreased.
2. Corporate activities and employment
Industrial production is increasing at a moderate pace.
Industrial production is increasing at a moderate pace. By type of industry, general-purpose, production and business oriented machinery is picking up. Transport equipment, electronic parts and devices have shown a steady undertone.
As for short-term prospects, production is expected to increase at a moderate pace, reflecting the improvement of export conditions and domestic demand being in good condition.
Also, the Survey of Production Forecasts expects an increase of 0.2% in August and an increase of 1.7% in September from the previous month.
Corporate profits are improving, mainly among large firms. Firms’ judgment on current business conditions is improving. The number of corporate bankruptcies has been almost flat.
Corporate profits are improving, mainly among large firms. According to the Quarterly Financial Statements Statistics of Corporations by Industry, corporate profits during the April-June quarter of 2013 increased by 24.0% from the previous year, and by 10.5% from the previous quarter. By size of company, large and medium-sized companies saw an increase of 40.2% in corporate profits, while smaller companies saw a decline of 12.5%. According to the BOJ Tankan (June survey), sales in fiscal year 2013 are expected to increase for the fourth consecutive year, and current profits are expected to increase for the second consecutive year.
Firms’ judgment on current business conditions is improving. The Tankan (June survey) revealed that firms’ judgment on current business conditions improved by 6 points for all enterprises in all industries. By industry, large manufacturers’ judgment on current business conditions improved by 12 points, that for large non-manufacturers improved by 6 points, that for small manufacturers improved by 5 points, and that for small non-manufacturers improved by 4 points. According to the corporate activity-related DI of the Economy Watchers Survey (August survey), both current and prospective business conditions decreased.
The number of corporate bankruptcies has been almost flat.
The employment situation is improving.
The employment situation is improving. The total unemployment rate decreased by 0.1 percentage points from the previous month to 3.8% in July. The total unemployment rate of those aged 15 to 24 was 6.0%, a decrease of 0.4 percentage points from the previous month. The labor force and the number of unemployed persons decreased. The number of employed persons and that of employees are increasing. The effective ratio of job offers to applicants has been rising because of an increase in the number of new job offers, etc. Overtime hours worked in the manufacturing industry have been on an upward trend.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings show movements of picking up.
As for short-term prospects, the employment situation is expected to improve.
3. Prices and the financial market
Domestic corporate goods prices have been rising at a moderate pace. Consumer prices have been rising, due mainly to increasing energy prices, and those excluding energy prices have also shown a steady undertone as a trend.
Domestic corporate goods prices have been rising at a moderate pace.
Consumer prices, in terms of general, excluding fresh food, petroleum products and other specific components (referred to as "core core"), have shown a steady undertone .
According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices increased from the previous month in August.
As for short-term prospects, consumer prices (core core) are expected to hold firm for the time being.
Taken together, these recent movements show that the deflation is ending.
As for stock prices, after declining from the 13,700-yen level to the 13,300-yen level, the Nikkei Stock Average rose to the 14,400-yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 97-yen level to the 100-yen level.