Monthly Economic ReportExecutive Summary( Nov 2020 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is still in a severe situation due to the Novel Coronavirus, but it is showing movements of picking up
- Private consumption is picking up.
- Business investment is decreasing recently.
- Exports are picking up.
- Industrial production is picking up.
- Corporate profits are decreasing substantially as a whole due to the influence of the infectious disease, despite a smaller decline in some large companies. Firms' judgments show movements of improvement, although some severe aspects remain.
- Employment situation shows steady movements in some components such as the number of employees, while weakness remains, due to the influence of the infectious disease.
- Consumer prices are flat.
Concerning short-term prospects, the economy is expected to show movements of picking up, supported by the effects of the policies and improvement in overseas economies while the socio-economic activities will be resumed with taking measures to prevent the spread of infectious diseases. However, 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 effort toward the reconstruction and revitalization from the Great East Japan Earthquake and coping with disasters becoming ever more severe and frequent. The Government will balance prevention of the spread of the Novel Coronavirus and economic activities, and thoroughly secure people's daily lives through protecting employment and keeping businesses with determination to avoid a return to deflation absolutely. The Government will achieve a strong economic growth again through intensive reforms including regulatory reforms and necessary investments for the new purpose including digitization that have been revealed by the spread of infections. For the major policies of that, the Government will specify reforms in the Growth Strategy Council, which was newly established, along a major direction and priority issues discussed in the Council on Economic and Fiscal Policy, based on the " Basic Policies for Economic and Fiscal Management and Reform 2020 " and so on.
The Government will implement the " Emergency Economic Measures to cope with the Novel Coronavirus " including the FY2020 supplementary budget, and the FY2020 second supplementary budget, and swiftly develop a new economic stimulus package to prevent the spread of the Novel Coronavirus and support employment and businesses, and return to a path of economic growth led by private sector demand such as ensuring the economic trend towards recovery and calling for private investment for Post-Corona era.
The Bank of Japan enhances monetary easing with a view to doing its utmost to support financing mailnly of firms and maintaining stability in financial market. 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
Real GDP (gross domestic product) in the July-September quarter of 2020 increased by 5.0% on a quarterly basis (at an annual rate of 21.4%), posing positive growth for the first time in four quarters. Nominal GDP increased by 5.2% on a quarterly basis, posing positive growth for the first time in four quarters.
Private consumption is 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 Shipment's, etc.), increased by 1.6% in September from the previous month. As for recent trends in each index, Family Income and Expenditure Survey shows that the real consumption expenses increased by 3.8% from the previous month in September. Looking at Current Survey of Commerce, sales-side statistics, the retail sales value decreased by 0.1% from the previous month in September.
Looking at the background of consumption trends, real wage income of employees is showing movements of picking up recently. Consumer confidence is picking up.
Concerning short-term prospects, the economy is expected to show movements of picking up while the socio-economic activities will be resumed with taking measures to prevent the spread of infectious diseases.
Business investment is decreasing recently.
Business investment is decreasing recently. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey, including software investment) show that business investment decreased in the April-June quarter of 2020 by 6.3% from the previous quarter. By industry, business investment decreased for manufacturers by 5.3% from the previous quarter, and decreased for non-manufacturers by 6.8%.
Capital Goods Shipments and Imports, supply-side statistics, are decreasing recently. Software investment has been in a weak tone recently.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (September survey), planned business investment in fiscal year 2020 is expected to increase for manufacturers, and that for non-manufacturers is expected to decrease, thus that for all industries is expected to decrease. In BOJ Tankan, firms' judgment on production capacity has been showing a high feeling of excess mainly among manufacturers. The figures for Orders Received for Machinery, a leading indicator, have been decreasing at a slower tempo.
As for short-term prospects, cautious movements are expected to continue for a while, due to a decrease in corporate profits and a growing sense of uncertainty about the future.
Housing construction is in a weak tone.
Housing construction is in a weak tone. Construction of owned houses has been flat recently. Construction of houses for rent is moderately decreasing. Construction of houses for sale has been in a weak tone. Total number of sales of condominiums in the Tokyo metropolitan area is picking up.
As for short-term prospects, housing construction is expected to remain in a weak tone.
Public investment shows steady performance.
Public investment shows steady performance. The amount of public construction completed in September increased by 1.8% from the previous month, the amount of contracted public works in October decreased by 5.9% from the previous month, and the amount of public works orders received in September increased by 20.8% from the previous month.
As for short-term prospects, public investment is expected to show steady performance due to the execution of related budgets.
Exports are picking up. Imports are in a weak tone recently. The balance of goods and services is in near equilibrium.
Exports are picking up. By region, exports to Asia, the U.S. and other regions are picking up. Exports to EU show movements of picking up. As for effects of the infectious disease on inbound tourism, the number of foreign tourists in October decreased by 98.9%. Concerning short-term prospects, exports are expected to continue to pick up, supported by the improvement in overseas economies. However, full attention should be given to the downside risks of overseas economies.
Imports are in a weak tone recently. By region, imports from Asia and EU are leveling off. Imports from the U.S. show weakness. As for short-term prospects, imports are expected to pick up while the socio-economic activities will be resumed.
The balance of goods and services is in near equilibrium. The surplus in the balance of trade in September increased, as export values increased. The deficit in the balance of services decreased.
2. Corporate activities and employment
Industrial production is picking up.
Industrial production is picking up. The Indices of Industrial Production increased by 3.9% from the previous month in September. The Indices of Industrial Inventories decreased by 0.5% from the previous month in September. The Survey of Production Forecast in Manufacturing expects an increase of 4.5% in October, and an increase of 1.2% in November.
By industry, transport equipment is picking up. Production machinery is almost flat. Electronic parts and devices are increasing moderately.
As for short-term prospects, production is expected to continue to pick up. However, full attention should be given to the further downside risks of overseas economies, and to the effects of supply-chain risk by the infectious disease.
Corporate profits are decreasing substantially as a whole due to the influence of the infectious disease, despite a smaller decline in some large companies. Firms' judgments show movements of improvement, although some severe aspects remain. The number of corporate bankruptcies is almost flat.
Corporate profits are decreasing substantially as a whole due to the influence of the infectious disease, despite a smaller decline in some large companies. During the July-September quarter of 2020, the current profits of the listed companies decreased from the previous year both for manufacturers and non-manufacturers. According to the BOJ Tankan (September survey), in fiscal year 2020, sales are expected to decrease by 10.0% in the first half of the year and are expected to decrease by 3.3% in the second half from the previous year. Current profits are expected to decrease by 38.9% in the first half, and decrease by 15.7% in the second half from the previous year.
Firms ' judgments show movements of improvement, although some severe aspects remain. The BOJ Tankan (September survey) revealed that firms' judgment on current business conditions rose for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business conditions as of December, remains almost unchanged from that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), current and prospective business conditions both rose.
The number of corporate bankruptcies is almost flat.
Employment situation shows steady movements in some components such as the number of employees, while weakness remains, due to the influence of the infectious disease.
The total unemployment rate was 3.0% in September, the same level as 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 showing movements of picking up recently. The number of new job offers is showing movements of picking up recently. Active job openings to applicants ratio is decreasing. Overtime hours worked in the manufacturing industry are showing movements of picking up.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are showing movements of picking up recently. These results show that real wage income of employees is showing movements of picking up recently.
According to the BOJ Tankan (September survey), firms' judgment on current employment conditions shows that the sense of a labor shortage remains strong in all industries, while manufacturers are feeling a sense of excess. Moreover, the daily number of active job openings to applicants compared to the previous year and the employment situation in the private sector are bottoming out, although they remain at a low level. Based on these results, employment situation shows steady movements in some components such as the number of employees, while weakness remains, due to the influence of the infectious disease. As for short-term prospects of the employment situation, it is expected to show steady movement while the socio-economic activities will be resumed. However, it may become weaker, depending on employment adjustment. Full attention should be given to the influence of the infectious disease.
As for short-term prospects of the employment situation, it is expected to show steady movement while the socio-economic activities will be resumed. However, it may become weaker, depending on employment adjustment. Full attention should be given to the influence of the infectious disease.
3. Prices and the financial market
Producer prices are flat recently. Consumer prices are flat.
Producer prices are flat recently.
Consumer prices, in terms of general, excluding fresh food and energy, are flat on the basis of excluding special factors in the form of policy measures. According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 72.4% in October, a decrease of 0.4 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to remain flat on the basis of excluding special factors in the form of policy measures.
As for stock prices, after declining from the 23,400-yen level to the 22,900-yen level, the Nikkei Stock Average rose to the 26,000-yen level, and thereafter declined to the 25,500-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 104-yen level to the 103-yen level, moved in the direction of depreciation to the 105-yen level, and thereafter moved in the direction of appreciation to the 103-yen level.