Monthly Economic ReportExecutive Summary( March 2016 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is on a moderate recovery, while weakness can be seen recently.
- Private consumption is almost flat, while consumer confidence appears to be pausing.
- Business investment is picking up.
- Exports are almost flat.
- Industrial production is flat recently.
- Corporate profits show a trend toward improvement, mainly among non-manufacturers. Firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas further recently.
- The employment situation is improving.
- 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 is improving. However, there are downside risks of the Japanese economy including slowing down of emerging Asian economies including the Chinese economy and countries with natural resources amid the weakness of overseas economies. In addition, attention should be given to the increased uncertainty in overseas economies and the effects of fluctuations in the financial and capital markets under such circumstances.
(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". The Government also swiftly and steadily implements "TPP Policy Plan" , "Urgent Policies to Realize a Society in Which All Citizens are Dynamically Engaged" and the FY2015 supplementary budget based on them. And the Government also works for early passage of the FY2016 budget and the related bills.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 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
Private consumption is almost flat, while consumer confidence appears to be pausing.
Private consumption is almost flat. Real gross income of employees is picking up, while consumer confidence appears 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 0.6% in January from the previous month.
Concerning short-term prospects, consumption is expected to pick up, supported by the improvement in the employment and income situations.
Business investment is picking up.
Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey) show that business investment decreased in the October-December quarter of 2015 by 0.0% from the previous quarter after increasing in the July-September quarter of 2015 by 5.7%. By industry, business investment increased for manufacturers by 0.1% from the previous quarter, and decreased for non-manufacturers by 0.1%. Capital Goods Shipments, supply-side statistics, are almost flat.
According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (December 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 (January-March survey), planned business investment for all industries in fiscal year 2015 is expected to increase further than the last survey. As for fiscal year 2016, planned business investment is expected to decrease. The figures for Orders Received for Machinery, a leading indicator, show movements of picking up.
As for short-term prospects, business investment is expected to increase, mainly reflecting the improvement of corporate profits.
Housing construction is almost flat.
Housing construction is almost flat. Construction of owned houses is almost flat, while it shows some weak movements recently. Construction of houses for rent and houses for sale are almost flat. In addition, the total number of sale of condominiums in the Tokyo metropolitan area is moderately decreasing.
As for short-term prospects, housing construction is expected to remain flat for the time being.
Public investment is decreasing moderately.
Public investment is decreasing moderately. The amount of contracted public works in February decreased by 2.2% and the amount of public works orders received in January decreased by 2.0% from the previous year. The amount of public construction completed in January decreased by 4.3% from the previous year, and increased by 1.6% from the previous month.
As for short-term prospects, public investment is expected to continue to decline moderately.
Exports and imports are almost flat. The balance of goods and services moves to surplus.
Exports are almost flat. By region, exports to Asia, the U.S. and the EU are almost flat. Exports to other regions are in a weak tone. 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 and the EU are almost flat. Imports from the U.S. are in a weak tone. As for short-term prospects, imports are expected to pick up gradually.
The balance of goods and services moves to surplus. The surplus in the balance of trade in January increased, as import values decreased to a greater extent than export values.
The deficit in the balance of services decreased.
2. Corporate activities and employment
Industrial production is flat recently.
Industrial production is flat recently. The Indices of Industrial Production increased by 3.7% from the previous month in January. The Indices of Industrial Inventories decreased by 0.2% from the previous month in January. The Survey of Production Forecast in Manufacturing expects a decrease of 5.2% in February, and an increase of 3.1% in March.
By industry, transport equipment shows movements of picking up. General-purpose, production and business-oriented machinery are decreasing.
Electronic parts and devices are flat.
As for short-term prospects, production is expected to pick up gradually mainly reflecting the moderate recovery of overseas economies.
Corporate profits show a trend toward improvement, mainly among non-manufacturers. Firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas further recently. The number of corporate bankruptcies is almost flat.
Corporate profits show a trend toward improvement, mainly among non-manufacturers. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2015 decreased by 1.7% from the previous year and by 1.5% from the previous quarter. By industry, manufacturers saw decrease of 21.2% in corporate profits from the previous year, while non-manufacturers saw an increase of 12.7%. By size of company, large and medium-sized companies saw a decrease of 6.7% from the previous year, while small companies saw an increase of 10.2%.
According to the BOJ Tankan (December survey), sales in fiscal year 2015 are expected to decrease, while current profits are expected to increase for four consecutive years.
Firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas further recently. The Tankan (December survey) revealed that firms' judgment on current business conditions is almost flat for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of March, deteriorated from that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (February survey), current and prospective business conditions fell.
The number of corporate bankruptcies is almost flat.
The employment situation is improving.
The employment situation is improving. The total unemployment rate was 3.2% in January, a decrease of 0.1 percentage points from the previous month. The total unemployment rate of those aged 15 to 24 was 5.0%, a decrease of 0.2 percentage points from the previous month. The labor force and the number of employed persons increased, while the number of unemployed persons decreased.
The number of employees is increasing. The number of new job offers is on an increasing trend. The effective ratio of job offers to applicants is rising. Overtime hours worked in the manufacturing industry are in a weak tone recently.
As for the movement of wages, contractual cash earnings are almost flat.The total amount of cash earnings is increasing moderately.
As for short-term prospects, the employment situation is expected to improve.
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, are rising moderately.
According to the Monthly Consumer Confidence Survey (general households), the ratio of households which forecast a rise in prices was 77.4% in February.
As for short-term prospects, consumer prices (general, excluding fresh food, petroleum products and other specific components) are expected to rise moderately for the time being.
As for stock prices, after rising from the 16,100-yen level to the 17,200-yen level, the Nikkei Stock Average declined to the 16,700-yen level.The yen against the U.S. dollar moved mostly from the 112-yen level to the 114-yen level.