Monthly Economic ReportExecutive Summary( Jul 2019 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace while weakness continuing mainly in exports.
- Private consumption is picking up.
- Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment.
- Exports are in a weak tone.
- Industrial production is flat recently while weakness continues in some sectors.
- Corporate profits hold firm at a high level. Firms' judgment on current business conditions show cautiousness further, mainly among manufacturers.
- The employment situation is improving steadily.
- Consumer prices are rising moderately in recent months.
Concerning short-term prospects, weakness remains for the time being, but the economy is expected to continue recovering, supported by the effects of the policies, while employment and income situation is improving. However, further attention should be given to the effects of situations over trade issues on the world economy, while the prospect of the Chinese economy, the uncertainty of situations and policies in overseas economies and the effects of fluctuations in the financial and capital markets also need attention.
(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 and the restoration and reconstruction from the 2016 Kumamoto Earthquake.
To this end, the Government decided the " Basic Policy on Economic and Fiscal Management and Reform 2019 ~ A New Era of Reiwa: Challenges toward Society 5.0 ~ ", the " Action Plan of the Growth Strategy " and so on June 21st. Hereafter, the Government will strengthen economic growth by boosting potential growth rate and expand virtuous cycle of growth and distribution based on these policies. Moreover, in order to create a society in which everyone plays an active role and feels secure, the Government will establish the social security system for all generations. Furthermore, looking ahead to the consumption tax rate hike planned for October 1, 2019, the Government will take all possible measures towards economic and fiscal management.
The Government will implement the FY2018 supplementary budget and the FY2019 budget including the temporal and special measures swiftly and steadily.
The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity, prices and financial conditions.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption is picking up.
Private consumption is picking up. Real wage income of employees is increasing moderately. Consumer confidence is in a weak tone.
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 0.2% in May from the previous month.
Concerning short-term prospects, consumption is expected to continue to pick up, supported by the improvement in the employment and income conditions.
Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment.
Business investment is on the increase at a moderate pace, while weakness is seen recently in machinery investment. The Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey) show that business investment increased in the January-March quarter of 2019 by 1.1% from the previous quarter. By industry, business investment decreased for manufacturers by 1.7% from the previous quarter and increased for non-manufacturers by 2.8%. Capital Goods Shipments and Imports, supply-side statistics, are almost flat, although weakness can be seen in some areas.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (June survey), planned business investment for all industries in fiscal year 2019 is expected to increase. In Tankan, firms' judgment on production capacity indicates their sense of shortage. The figures for Orders Received for Machinery, a leading indicator, are almost flat.
As for short-term prospects, business investment is expected to increase at a moderate pace, mainly reflecting a high level of corporate profits and actions in growth sectors and such.
Housing construction is almost flat.
Housing construction is almost flat. Construction of owned houses has been increasing recently. Construction of houses for rent is moderately decreasing. Construction of houses for sale is almost flat. Total number of sales of condominiums in the Tokyo metropolitan area is in a weak tone recently.
As for short-term prospects, housing construction is expected to remain flat for the time being.
Public investment has shown a steady undertone.
Public investment has shown a steady undertone. The amount of public construction completed in May increased by 0.9% from the previous month, the amount of contracted public works in June decreased by 8.0% from the previous month, and the amount of public works orders received in May decreased by 3.3% from the previous month.
As for short-term prospects, public investment is expected to show steady movement due to the execution of related budgets.
Exports are in a weak tone. Imports are almost flat. The balance of goods and services is in deficit.
Exports are in a weak tone. By region, exports to Asia and EU are in a weak tone. Exports to the U.S. and other regions are almost flat. As for short-term prospects, exports are expected to pick up, mainly reflecting the moderate recovery of overseas economies and such. However, attention should be given to the effects of situations over trade issues on the world economy, and the uncertainty in overseas economies including the prospect of Chinese economy.
Imports are almost flat. By region, imports from Asia, the U.S. and EU are almost flat. As for short-term prospects, imports are expected to pick up.
The balance of goods and services is in deficit.
For the goods in May, the exports value has decreased while the imports value has increased, so that the deficit has expanded. The balance of services turned to deficit.
2. Corporate activities and employment
Industrial production is flat recently while weakness continues in some sectors.
Industrial production is flat recently while weakness continues in some sectors. The Indices of Industrial Production increased by 2.0% from the previous month in May. The Indices of Industrial Inventories increased by 0.5% from the previous month in May. The Survey of Production Forecast in Manufacturing expects a decrease of 1.2% in June, and an increase of 0.3% in July.
By industry, transport equipment is increasing moderately. Production machinery is almost flat. Electronic parts and devices are decreasing.
As for short-term prospects, production is expected to pick up, though attention should be given to situations of the global economy, especially China.
Corporate profits hold firm at a high level. Firms' judgments on current business conditions show cautiousness further, mainly among manufacturers. The number of corporate bankruptcies is almost flat.
Corporate profits hold firm at a high level. According to the Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey), corporate profits during the January-March quarter of 2019 increased by 10.3% from the previous year and increased by 13.2% from the previous quarter. By industry, manufacturers saw a decrease of 6.3% in corporate profits from the previous year, and non-manufacturers saw an increase of 18.4%. By size of company, large and medium-sized companies saw an increase of 11.2% from the previous year, and small companies saw an increase of 8.6%. According to the BOJ Tankan (June survey), in fiscal year 2019, sales are expected to increase by 1.7% in the first half of the year and are expected to increase by 0.6% in the second half from the previous year. Current profits are expected to decrease by 7.9% in the first half and decrease by 0.4% in the second half from the previous year.
Firms' judgments on current business conditions show cautiousness further, mainly among manufacturers. The BOJ Tankan (June survey) revealed that firms' judgment on current business conditions deteriorated for all enterprises in all industries as that for all enterprises in the manufacturing industry deteriorated while that for all enterprises in the non-manufacturing industry was almost flat. 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 (June survey), current and prospective business conditions remained unchanged.
The number of corporate bankruptcies is almost flat.
The employment situation is improving steadily.
The employment situation is improving steadily. Meanwhile, the sense of a labor shortage is at a high level. The total unemployment rate was 2.4% in May, the same level as the previous month. The labor force, the number of employed persons, and the number of unemployed persons all decreased.
The number of employees is increasing moderately. The number of new job offers and active job openings to applicants ratio are almost flat. Overtime hours worked in the manufacturing industry are almost flat.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing moderately.
According to the BOJ Tankan (June survey), firms' judgment on current employment conditions showed that the labor shortage remained severe.
As for short-term prospects, the employment situation is expected to improve steadily.
3. Prices and the financial market
Producer prices are declining moderately in recent months. Consumer prices are rising moderately in recent months.
Producer prices are declining moderately in recent months.
Consumer prices, in terms of general, excluding fresh food and energy, are rising moderately in recent months.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 87.9% in June, an increase of 0.9 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise moderately for the time being.
As for stock prices, after declining from the 21,300-yen level to the 21,000-yen level, the Nikkei Stock Average rose to the 21,700-yen level, and thereafter declined to the 21,400-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 108-yen level to the 107-yen level, moved in the direction of depreciation to the 108-yen level, and thereafter moved in the direction of appreciation to the 107-yen level.