Monthly Economic ReportExecutive Summary( November 2015 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is on a moderate recovery, while weakness can be seen in some areas.
- Private consumption holds firm as a whole.
- Business investment is almost flat.
- Exports are in a weak tone.
- Industrial production is in a weak tone recently.
- Corporate profits are improving. Firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas.
- The employment situation shows a trend toward improvement.
- Consumer prices are rising moderately.
Concerning short-term prospects, the economy is expected toward recovery, supported by the effects of the policies, while employment and income situation show a trend toward improvement. However, there are downside risks of the Japanese economy including slowing down of emerging Asian economies including the Chinese economy as the process of U.S. monetary policy normalization emerges.
(Policy stance)
The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscal consolidation simultaneously, in addition to accelerate the reconstruction from the Great Earthquake. To this end, the Government steadily implements the “Basic Policy on Economic and Fiscal Management and Reform 2015”, the “Japan Revitalization Strategy Revised in 2015”, the “Regulatory Reform Work Plan” and the “Basic Policy for Overcoming Population Decline and Vitalizing Local Economy in Japan 2015”.Through various efforts such as Public-Private Dialogue towards Investment for the Future, the Government continuously pursues to expand the economic virtuous cycles which cover local areas, SMEs and small-scale businesses, through directing growing corporate profits towards investment, wage increase and further improvement in the employment situation by these measures. The Government will create an emergency plan that deals with structural issues such as low birth rate and aging population, in order to realize the society promoting dynamic engagement of all citizens.
In order to truly connect TPP to economic revitalization and vitalizing local economies in Japan and to remove worries about the effect, the Government elaborated “TPP Policy Plan” on November 25th．Hereafter, the Government implements concreate measures based on this plan．
The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity and prices.
Detailed explanations
1. Demand trends such as consumption and investment
Real GDP (gross domestic product) in the July-September quarter of 2015 decreased by 0.2% on a quarterly basis (at an annual rate of 0.8%), posting negative growth for the second consecutive quarter. Nominal GDP increased by 0.0% on a quarterly basis, posting positive growth for the fourth consecutive quarter.
Private consumption holds firm as a whole.
Private consumption holds firm as a whole. Real gross income of employees is picking up. Movements of picking up in consumer sentiment appear to be pausing.
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.), increased by 0.0% in September from the previous month.
Concerning short-term prospects, consumption is expected to pick up, supported by the improvement trend in the employment and income situations.
Business investment is almost flat.
Business investment is almost flat. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey) show that business investment decreased in the April-June quarter of 2015 by 2.7% from the previous quarter after increasing in the January-March quarter of 2015 by 6.0%. By industry, business investment increased for manufacturers by 0.4% from the previous quarter, and decreased for non-manufacturers by 4.4%. Capital Goods Shipments, supply-side statistics, show some weak movements recently.
According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (September survey), planned business investment for all industries and that for non-manufacturers in fiscal year 2015 are expected to increase for four consecutive years, and that for manufacturers is expected to increase for five consecutive years. According to the Business Outlook Survey (July-September survey), planned business investment in fiscal year 2015 is expected to increase for large manufacturers, and decrease for large non-manufacturers. The figures for Orders Received for Machinery, a leading indicator, are in a weak tone recently.
As for short-term prospects, business investment is expected to increase, mainly reflecting the improvement of corporate profits.
Housing construction is generally picking up.
Housing construction is generally picking up. Construction of owned houses is almost flat. Construction of houses for rent is picking up. Construction of houses for sale is generally picking up. In addition, the total number of sales of condominiums in the Tokyo metropolitan area is almost flat.
As for short-term prospects, housing construction is expected to continue to show a trend of picking up.
Public investment shows weakness.
Public investment shows weakness. The amount of contracted public works in October decreased by 4.8% and the amount of public works orders received in September decreased by 4.4% from the previous year. The amount of public construction completed in September decreased by 3.5% from the previous year, and by 2.0% from the previous month.
As for short-term prospects, public investment is expected to be sluggish for the time being.
Exports are in a weak tone. Imports are almost flat. The deficit in the balance of goods and services is almost flat.
Exports are in a weak tone. By region, exports to Asia and other regions are in a weak tone. Exports to the U.S. are decreasing moderately. Exports to the EU are almost flat. As for short-term prospects, exports are expected to pick up gradually, mainly reflecting the moderate recovery of overseas economies. However, it should be noted that there are risks of a downturn in overseas economies.
Imports are almost flat. By region, imports from Asia, the U.S. and the EU are almost flat. As for short-term prospects, imports are expected to pick up gradually.
The deficit in the balance of goods and services is almost flat.
The deficit in the balance of trade in September increased, as export values decreased to a greater extent than import values. The balance of services moved into the red.
2. Corporate activities and employment
Industrial production is in a weak tone recently.
Industrial production is in a weak tone recently. The Indices of Industrial Production increased by 1.1% from the previous month in September. The Indices of Industrial Inventories decreased by 0.4% from the previous month in September. The Survey of Production Forecast in Manufacturing expects an increase of 4.1% in October, and a decrease of 0.3% in November.
By industry, transport equipment is in a weak tone. General-purpose, production and business oriented machinery are decreasing recently. Electronic parts and devices are bottoming out.
As for short-term prospects, production is expected to pick up gradually mainly reflecting the moderate recovery of overseas economies.
Corporate profits are improving. Firms' judgment on current business conditions is almost flat, while cautiousness can be seen in some areas. The number of corporate bankruptcies is almost flat.
Corporate profits are improving. According to the BOJ Tankan (September survey), sales in fiscal year 2015 are expected to increase for six consecutive years, and current profits are expected to increase for four consecutive years. During the July-September quarter of 2015, the increasing rate of current profits of the listed companies from the previous year fell, while they remain at a high level.
Firms' judgment on current business conditions is almost flat, while cautiousness can be seen in some areas. The Tankan (September survey) revealed that firms' judgment on current business conditions is almost flat for all enterprises in all industries, while that for large manufacturers, etc. deteriorated. Firms' judgment on future business conditions, which indicates the business condition as of December, deteriorated from that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), current business conditions rose, while prospective business conditions fell.
The number of corporate bankruptcies is almost flat.
The employment situation shows a trend toward improvement.
The employment situation shows a trend toward improvement. The total unemployment rate stood at 3.4% in September, the same level as the previous month. The total unemployment rate of those aged 15 to 24 was 5.9%, an increase of 0.3 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons increased.
The number of employees and the number of new job offers are increasing recently. The effective ratio of job offers to applicants is rising. Overtime hours worked in the manufacturing industry are in a weak tone.
As for the movement of wages, contractual cash earnings are picking up. The total amount of cash earnings is increasing moderately.
As for short-term prospects, the employment situation is expected to continue to show a trend toward improvement.
3. Prices and the financial market
Producer prices are declining moderately. Consumer prices are rising moderately.
Producer prices are declining moderately.
Consumer prices, in terms of general, excluding fresh food, petroleum products and other specific components (referred to as "core core"), are rising moderately.
According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices was 81.0%, a decrease of 5.3% from the previous month in October.
As for short-term prospects, consumer prices (core core) are expected to rise moderately for the time being.
As for stock prices, the Nikkei Stock Average rose from the 18,000-yen level to the 19,800-yen level. The yen against the U.S. dollar moved in the direction of depreciation from the 118-yen level to the 122-yen level.