Monthly Economic ReportExecutive Summary( Mar 2020 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is in severe situation, extremly depressed by the Novel Coronavirus.
- Private consumption is showing weakness recently due to the influence of the infectious disease.
- Business investment is almost flat.
- Exports are in a weak tone.
- Industrial production remains in a weak tone.
- Corporate profits are in a weak tone mainly among manufacturers. Firms' judgments on current business conditions is deteriorating, due to the influence of the infectious disease.
- Employment situation is affected by the infectious disease although it has been improving.
- Consumer prices are flat recently.
Concerning short-term prospects, severe situation is expected to remain due to the influence of the infectious disease. Moreover, full attention should be given to the further downside risks to the domestic and foreign economy which are affected by the influence of the infectious disease. Also, attention should be given to 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 and the restoration and reconstruction from the 2016 Kumamoto Earthquake.
To this end, the Government will strengthen economic growth by boosting potential growth rate and expand virtuous cycle of growth and distribution based on the " Basic Policy on Economic and Fiscal Management and Reform 2019 ", the " Action Plan of the Growth Strategy " and so on. 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, the Government will continue to pay careful attention to the economic trend after the consumption tax rate hike and implement the FY2019 budget including the temporal and special measures steadily.
The Government will swiftly implement the " Second Batch of Emergency Response Measures Regarding the Novel Coronavirus " (March 10th, the Novel Coronavirus Response Headquarters decision) etc. with a view to exert every effort for prioritizing the employment and business continuity and supporting life above all , for the time being, along with the preventing the spread of infections.
The Government will implement " Comprehensive Economic Measures to Create a Future with Security and Growth " and the FY2019 supplementary budget swiftly and steadily, and work for early passage of the FY2020 budget and the related bills. The Government will continue to carefully assess domestic and overseas economic trends as well as the impact on the lives of the public, and implement necessary and sufficient economic and fiscal policies without hesitation in a timely manner and put forward bold policies in order to return the japanese economy once more to a solid growth trajectory.
The Bank of Japan decided enhancement of monetary easing with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets on March 16th, 2020. 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 showing weakness recently due to the influence of the infectious disease.
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 1.0% in January from the previous month.
Looking at the background of consumption trends, real wage income of employees is increasing moderately. Meanwhile, consumer confidence is in a weak tone.
As a whole, private consumption is showing weakness recently due to the influence of the infectious disease.
As for short-term prospects, weakness is expected to remain due to the influence of the infectious disease.
Business investment is almost flat.
Business investment is almost flat. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey, including software investment) show that business investment decreased in the October-December quarter of 2019 by 4.2% from the previous quarter. By industry, business investment decreased for manufacturers by 5.0% from the previous quarter and decreased for non-manufacturers by 3.8%.
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) (December survey) and the Business Outlook Survey (January-March survey), planned business investment for all industries in fiscal year 2019 is expected to increase. According to the Business Outlook Survey (January-March survey), the expected increase of planned business investment (year on year) in fiscal year 2020 is larger than the expected increase in fiscal year 2019 according to the survey in the same quarter of the year. In BOJ Tankan, firms' judgment on production capacity indicates their sense of shortage mainly among non-manufacturers on the whole, although feelings of excess can be seen among manufacturers. The figures for Orders Received for Machinery, a leading indicator, are almost flat. The planned amount of construction is in a weak tone.
As for short-term prospects, business investment is expected to pick up, mainly reflecting actions in growth sectors and such. However, full attention should be given to the influence of the infectious disease.
Housing construction is in a weak tone.
Housing construction is in a weak tone. Construction of owned houses is moderately decreasing. Construction of houses for rent is showing signs of bottoming out recently. Construction of houses for sale is in a weak tone recently. Total number of sales of condominiums in the Tokyo metropolitan area is in a weak tone.
As for short-term prospects, housing construction is expected to remain in a weak tone.
Public investment holds firm.
Public investment holds firm. The amount of public construction completed in January decreased by 0.5% from the previous month, the amount of contracted public works in February decreased by 1.9% from the previous month, and the amount of public works orders received in January increased by 4.2% 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 on a decline recently due to the influence of the infectious disease. The balance of goods and services is in surplus.
Exports are in a weak tone. By region, exports to Asia are in a weak tone. Exports to the U.S. are showing the movements of picking up recently. Exports to EU are on a moderate decline. Exports to other regions are almost flat. As for short-term prospects, exports are expected to show weakness, due to the slowdown of overseas economies. Full attention should be given to effects on inbound tourism and further downside risks of overseas economies by the infectious disease.
Imports are on a decline recently due to the influence of the infectious disease. By region, imports from Asia are on a decline recently. Imports from the U.S and EU are almost flat. As for short-term prospects, imports are expected to remain affected by supply restriction due to the infectious disease.
The balance of goods and services is in surplus.
For the goods in January, the exports value has decreased, so that the surplus has turned to deficit. The balance of services turned to deficit.
2. Corporate activities and employment
Industrial production remains in a weak tone.
Industrial production remains in a weak tone. The Indices of Industrial Production increased by 1.0% from the previous month in January. The Indices of Industrial Inventories increased by 1.6% from the previous month in January. The Survey of Production Forecast in Manufacturing expects an increase of 5.3% in February, and a decrease of 6.9% in March.
By industry, transport equipment is decreasing. Production machinery is almost flat. Electronic parts and devices are picking up.
As for short-term prospects, industrial production is expected to show weakness. Full attention should be given to downside risks of overseas economies and effects of supply-chain risk by the infectious disease.
Corporate profits are in a weak tone, mainly among manufacturers. Firms' judgments on current business conditions is deteriorating, due to the influence of the infectious disease. The number of corporate bankruptcies appears to be increasing recently .
Corporate profits are in a weak tone, mainly among manufacturers. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2019 decreased by 4.6% from the previous year and decreased by 2.5% from the previous quarter. By industry, manufacturers saw a decrease of 15.0% in corporate profits from the previous year, and non-manufacturers saw an increase of 1.1%. By size of company, large and medium-sized companies and small companies saw a decrease of 4.4% and 5.3% respectively from the previous year. According to the BOJ Tankan (December survey), in fiscal year 2019, sales are expected to increase by 0.8% in the first half of the year, and are expected to decrease by 0.9% in the second half from the previous year. Current profits are expected to decrease by 5.0% in the first half and decrease by 10.3% in the second half from the previous year.
Firms' judgments on current business conditions is deteriorating, due to the influence of the infectious disease. The BOJ Tankan (December survey) revealed that firms' judgment on current business conditions deteriorated for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of March, becomes more cautious than 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 significantly.
The number of corporate bankruptcies appears to be increasing recently.
Employment situation is affected by the infectious disease although it has been improving.
Employment situation is affected by the infectious disease although it has been improving. The total unemployment rate was 2.4% in January, an increase of 0.2 percentage points from the previous month. The labor force and the number of employed persons decreased while the number of unemployed persons increased.
The number of employees is almost flat recently. Excluding the influence of the increase in the number of job offers in December and the decrease in January due to the addition of items of the job offering form implemented from January 2020, the number of new job offers is on a downward trend and active job openings to applicants ratio is decreasing. Overtime hours worked in the manufacturing industry are decreasing.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing moderately. These results show that real wage income of employees is increasing moderately.
According to the BOJ Tankan (December survey),firms ' judgment on current employment conditions showed that the labor shortage remained severe, mainly among non-manufacturers.
As for short-term prospects of the employment situation, full attention should be given to the influence of the infectious disease.
3. Prices and the financial market
Producer prices are declining moderately recently. Consumer prices are flat recently.
Producer prices are declining moderately recently on the basis of excluding the direct effects of the consumption tax increase.
Consumer prices, in terms of general, excluding fresh food and energy, are flat recently on the basis of excluding the direct effects of the consumption tax increase and free early childhood education and nurseries. According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 76.5% in February, a decrease of 1.7 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to be almost flat on the basis of excluding the direct effects of the consumption tax increase and free early childhood education and nurseries.
As for stock prices, after declining from the 23,300-yen level to the 16,500-yen level, the Nikkei Stock Average rose to the 18,000-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 112-yen level to the 102-yen level, moved in the direction of depreciation to the 110-yen level.