Monthly Economic ReportExecutive Summary( Sep 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 holds firm as a whole.
- Business investment picking up appears to be pausing.
- Exports are almost flat.
- Industrial production is flat.
- Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions shows cautiousness.
- The employment situation is improving.
- Consumer prices are flat.
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, including the issues of the UK leaving the EU and the effects of fluctuations in the financial and capital markets.
(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 make effort toward the reconstruction and revitalization from the Great East Japan Earthquake. To this end, the Government steadily implements the " Basic Policies for Economic and Fiscal Management and Reform 2016", the "Japan Revitalization Strategy 2016" , the "Regulatory Reform Work Plan" , the "Basic Policies for Overcoming Population Decline and Vitalizing Local Economy in Japan 2016", and the "Japan's Plan for the Dynamic Engagement of All Citizens"． In addition, the government promotes working-style reform, developing a concreate action plan by the end of FY2016, and implements "Economic Measures for Realizing Investment for the Future" in order to overcome deflation completely and pave the way for steady economic growth. The Government also swiftly and steadily implements the FY2015 supplementary budget and accelerates the implementation of the FY2016 budget, and will implement that in the first half of FY2016 as much as possible.Utilizing the FY2016 supplementary budget etc., the Government will make sure to support for the daily lives of those affected by the 2016 Kumamoto Earthquake, and also work on promoting early recovery of the local economy and industries.
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 holds firm as a whole.
Private consumption holds firm as a whole. Real wage income of employees is increasing moderately. Consumer confidence shows movements of picking up.
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 0.3% in July 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 improvement appears to be pausing.
Business investment improvement appears to be pausing. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey) show that business investment decreased in the April-June quarter of 2016 by 0.5% from the previous quarter after decreasing in the January-March quarter of 2016 by 0.0%. By industry, business investment increased for manufacturers by 2.0% from the previous quarter, and decreased for non-manufacturers by 1.9%. Capital Goods Shipments, supply-side statistics, are almost flat.
According to the Short-Term Economic Survey of Enterprises in Japan (Tankan) (June survey), planned business investment for all industries in fiscal year 2016 is expected to increase for five consecutive years, that for manufacturers is expected to increase for six consecutive years, while that for non-manufacturers is expected to decrease for the first time in five years. According to the Business Outlook Survey (July-September survey), planned business investment in fiscal year 2016 is expected to increase for manufacturers, and decrease for non-manufacturers. 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 so far.
Housing construction is picking up.
Housing construction is picking up. Construction of owned houses and houses for sale have shown movements of picking up. Construction of houses for rent is increasing. 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 has shown a steady undertone recently.
Public investment has shown a steady undertone recently. The amount of public construction completed in June increased by 0.6% from the previous month, and decreased by 3.6% from the previous year. The amount of contracted public works in August increased by 12.0% and the amount of public works orders received in July decreased by 11.3% from the previous year.
As for short-term prospects, a boosting effect by the early execution of related budgets and the supplementary budget is expected.
Exports and imports are almost flat. The surplus in the balance of goods and services is flat.
Exports are almost flat. By region, exports to Asia are almost flat. Exports to the U.S. and the EU show movements of picking up. 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, the U.S. and the EU are almost flat. As for short-term prospects, imports are expected to pick up gradually.
The surplus in the balance of goods and services is flat.
The surplus in the balance of trade in July decreased, as export values decreased to a greater extent than import values. The deficit in the balance of services decreased.
2. Corporate activities and employment
Industrial production is flat.
Industrial production is flat. The Indices of Industrial Production decreased by 0.4% from the previous month in July. The Indices of Industrial Inventories decreased by 2.4% from the previous month in July. The Survey of Production Forecast in Manufacturing expects an increase of 4.1% in August, and a decrease of 0.7% in September..
By industry, transport equipment shows movements of picking up. General-purpose, production and business-oriented machinery are flat. Electronic parts and devices are flat recently.
As for short-term prospects, production is expected to pick up gradually mainly reflecting the moderate recovery of overseas economies.
Corporate profits improvement appears to be pausing, although they remain at a high level. Firms' judgment on current business conditions shows cautiousness. The number of corporate bankruptcies is almost flat.
Corporate profits improvement appears to be pausing, although they remain at a high level. According to the Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey), corporate profits during the April-June quarter of 2016 decreased by 10.0% from the previous year, while they increased by 4.8% from the previous quarter. By industry, manufacturers saw a decrease of 22.4% in corporate profits from the previous year, and non-manufacturers saw a decrease of 3.1%. By size of company, large and medium-sized companies saw a decrease of 11.1% from the previous year, and small companies saw a decrease of 6.1%. According to the BOJ Tankan (June Survey), in fiscal year 2016, sales are expected to decrease by 1.2% in the first half of the year, and are expected to increase by 0.9% in the second half from the previous year. Current profits are expected to decrease by 13.9% in the first half, and are expected to increase by 0.2% in the second half from the previous year..
Firms' on current business conditions shows cautiousness. The Tankan (June survey) revealed that firms' judgment on current business conditions becomes cautious for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of September, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (August survey), current and prospective business conditions rose.
The number of corporate bankruptcies is almost flat
The employment situation is improving.
The employment situation is improving. The total unemployment rate was 3.0% in July, a decrease of 0.1 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 increasing. The effective ratio of job offers to applicants is on an upward trend. Overtime hours worked in the manufacturing industry are almost flat.
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 at a slower tempo recently. Consumer prices are flat.
Producer prices are declining at a slower tempo recently.
Consumer prices, in terms of general, excluding fresh food, petroleum products and other specific components, are flat.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 70.5% in August, a decrease of 1.7% points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food, petroleum products and other specific components) are expected to rise moderately, but they are expected to remain flat for the time being.
As for stock prices, after rising from the 16,500-yen level to the 17,000-yen level, the Nikkei Stock Average declined to the 16,600-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved from the 100-yen level to the 103-yen level.