Monthly Economic ReportExecutive Summary( Dec 2021 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy shows movements of picking up recently as the severe situation due to the Novel Coronavirus is gradually easing.
- Private consumption is picking up recently.
- Business investment appears to be pausing for picking up.
- Exports are almost flat.
- Industrial production appears to be pausing for picking up.
- Corporate profits are picking up, although some weaknesses remain in non-manufacturers due to the influence of the infectious disease. Firms' judgments on current business conditions show movements of picking up.
- Employment situation shows picking up in some components such as job offers, while weakness remains due to the influence of the infectious disease.
- Consumer prices show steady movements.
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 economic and social activities move toward normalization. However, full attention should be given to the further increase in downside risks due to supply-side constraints and raw material prices. Also attention should be given to the effects of the Novel Coronavirus including variant on the Japanese and overseas economies and 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. In order to extricate Japan from deflation, bold monetary policy, flexible fiscal policy, and the promotion of growth strategies will be engaged in.
Regarding COVID-19, the Government assumes the worst-case scenario and takes all possible measures, including border control measures. The Government will ensure that our medical treatment structure is solidly in place, with the next increase in the number of cases firmly in mind, as well as fundamentally strengthen the entire course of progression from prophylaxis and discovery to early treatment by making vaccines, screening, and orally administered therapeutics much more widespread. Regarding the third dose of COVID-19 vaccine, the Government will accelerate the schedule as much as possible after identifying to some degree the effects of existing vaccines on the Omicron strain. At the same time, based on a policy of loosening restrictions on activities through the use of vaccines and testing as a package, the Government will work to restart socioeconomic activities that are close to normal.
The Government will support the current economy while paying close attention to downside risks. Even if the infection spreads again, the Government will secure people's livelihoods, employments, and businesses, and prevent further deterioration of economy. In addition, the Government will trigger a new form of capitalism, realize a virtuous cycle of growth and distribution, and put the economy on a self-sustained growth path. To this end, the Government will implement the "Economic Measures for Overcoming Coronavirus Infections and Opening Up a New Era" (November 19th, Cabinet Decision) and the FY2021 supplementary budget swiftly and properly. Moreover, the Government will compile the FY2022 budget in light of the "Basic Principles of FY2022 Budget Formulation" (December 3rd, Cabinet Decision) and the "Fiscal 2022 Economic Outlook and Basic Stance for Economic and Fiscal Management" (to be approved).
The Bank of Japan decided to extend the Special Program to Support Financing in Response to the Novel Coronavirus in part, with a view to continuing to support financing, mainly of small and medium-sized firms, on December 17th. The Government expects the Bank of Japan to pay careful attention to the economic impact of the infections and conduct appropriate monetary policy management, and 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 recently.
As for each index, looking at Family Income and Expenditure Survey, demand-side statistics, the real consumption expenses increased by 3.4% from the previous month in October. Looking at Current Survey of Commerce, sales-side statistics, the retail sales value increased by 1.0% from the previous month in October.
Looking at the background of consumption trends, real wage income of employees is almost flat. Consumer confidence is showing movements of picking up.
Based on these results, private consumption is picking up recently.
Concerning short-term prospects, the economy is expected to continue to pick up while economic and social activities move toward normalization.
Business investment appears to be pausing for picking up.
Business investment appears to be pausing for picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey, including software investment) show that business investment decreased in the July-September quarter of 2021 by 2.6% from the previous quarter. By industry, business investment decreased for manufacturers by 1.7% from the previous quarter and decreased for non-manufacturers by 3.0%.
Capital Goods Shipments and Imports, supply-side statistics, are almost flat.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (December survey), planned business investment for all industries in fiscal year 2021 is expected to increase. In the BOJ Tankan, firms' judgment on production capacity is improving. The figures for Orders Received for Machinery, a leading indicator, appear to be pausing for picking up. The planned amount of construction is almost flat.
As for short-term prospects, business investment is expected to pick up, mainly reflecting the improvement of corporate profits.
Housing construction is almost flat.
Housing construction is almost flat. Construction of owned houses is picking up. Construction of houses for rent is almost flat. Construction of houses for sale has been in a weak tone recently. Total number of sales of condominiums in the Tokyo metropolitan area is almost flat.
As for short-term prospects, housing construction is expected to remain flat for the time being.
Public investment has been in a weak tone recently, although it remains at a high level.
Public investment has been in a weak tone recently, although it remains at a high level. The amount of public construction completed in October decreased by 1.0% from the previous month, the amount of contracted public works in November decreased by 0.8% from the previous month, and the amount of public works orders received in October decreased by 2.7% from the previous month.
As for short-term prospects, the supplementary budget is expected to gradually produce effects, although public investment is expected to remain in a weak tone.
Exports are almost flat. Imports are in a weak tone recently. The balance of goods and services is in deficit.
Exports are almost flat. By region, exports to Asia are in a weak tone recently. Exports to the U.S. and the EU are almost flat. Exports to other regions are in a weak tone recently. As for effects of the infectious disease on inbound tourism, the number of foreign tourists in November decreased by 99.2% from 2019. Concerning short-term prospects, exports are expected to pick up, supported by the improvement in overseas economies. However, attention should be given to the further downside risk of the supply restriction and the trends in overseas economies.
Imports are in a weak tone recently. By region, imports from Asia are in a weak tone recently. Imports from the U.S. are pausing. Imports from the EU are pausing recently. As for short-term prospects, the economy is expected to gradually show movements of picking up while economic and social activities move toward normalization. However, attention should be given to the further downside risk of the supply restriction and others.
The balance of goods and services is in deficit.
The deficit in the balance of trade in October decreased, as import values decreased. The deficit in the balance of services increased.
2. Corporate activities and employment
Industrial production appears to be pausing for picking up.
Industrial production appears to be pausing for picking up. The Indices of Industrial Production increased by 1.8% from the previous month in October. The Indices of Industrial Inventories increased by 0.6% from the previous month in October. The Survey of Production Forecast in Manufacturing expects an increase of 9.0% in November, and an increase of 2.1% in December.
By industry, transport equipment shows movements of picking up. Production machinery is increasing at a slower pace. Electronic parts and devices are almost flat.
As for short-term prospects, production is expected to pick up. However, attention should be given to the further downside risk of the trends in overseas economies and the supply restriction.
Corporate profits are picking up, although some weaknesses remain in non-manufacturers due to the influence of the infectious disease. Firms' judgments on current business conditions show movements of picking up. The number of corporate bankruptcies is almost flat.
Firms' judgments on current business conditions show movements of picking up. The BOJ Tankan (December 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 March, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (November survey), current business conditions rose while prospective business conditions fell.
The number of corporate bankruptcies is almost flat.
Employment situation shows picking up in some components such as job offers, while weakness remains due to the influence of the infectious disease.
The total unemployment rate was 2.7% in October, a decrease of 0.1 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons all decreased.
The number of employees is almost flat. The number of new job offers is showing movements of picking up recently, although it remains at a low level. The active job openings to applicants ratio is almost flat. Overtime hours worked in the manufacturing industry are decreasing recently.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are almost flat recently. These results show that real wage income of employees is almost flat.
According to the BOJ Tankan (December survey), firms' judgment on current employment conditions shows that the sense of a labor shortage is strong.
Moreover, the daily number of active job openings to applicants and the employment situation in the private sector continue to show movements of picking up, although they remain at a low level.
Based on these results, employment situation shows picking up in some components such as job offers, 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.
3. Prices and the financial market
Producer prices are rising. Consumer prices show steady movements.
Producer prices are rising.
Consumer prices, in terms of general, excluding fresh food and energy, show steady movements on the basis of excluding special factors in the form of policy measures, etc.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 87.6% in November, an increase 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 continue to show steady movements for the time being, on the basis of excluding special factors in the form of policy measures, etc.
As for stock prices, after declining from the 28,700-yen level to the 27,700-yen level, the Nikkei Stock Average rose to the 29,000-yen level, and thereafter declined to the 28,500 level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 114-yen level to the 112-yen level, moved in the direction of depreciation to the 113-yen level.