Monthly Economic ReportExecutive Summary( Nov 2021 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy continues to show weakness in picking up, although the severe situation due to the Novel Coronavirus is gradually easing.
- Private consumption shows movements of picking up, while some weakness remains.
- Business investment is 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, although some severe aspects remain.
- Employment situation shows steady movements 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 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.
Based on the "Overview of Efforts to Ensure Peace of Mind in Preparation for the Next Spread of COVID-19 Infections" (November 12th, the Novel Coronavirus Response Headquarters decision), the Government will further strengthen a series of steps for prevention and discovery through to early treatment by making vaccines, screening, and pharmaceutical treatments widely available. The Government will also prepare for another possible wave of infections, assuming the worst situation. The Government will work to enable people to continue their daily lives and socio-economic activities while preventing the spread of infection through exploiting the vaccine and test package.
The Government will develop a new economic stimulus package to address these issues seamlessly, to take all possible measures to respond to the Novel Coronavirus, to trigger a new capitalism, whose concepts are a virtuous cycle of growth and distribution and developing a new post-COVID-19 society, and to ensure the safety and security of people. In the meantime, the Government continues to pay careful attention to the status of the infection and its impact on businesses and livelihoods, and implement necessary measures in a flexible manner through utilizing the reserve fund and others.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 smoothly and steadily implement the "Economic Measures for Overcoming Coronavirus Infections and Opening Up a New Era" (November 19th, Cabinet decision), submit the FY2021 supplementary budget to the Diet swiftly, and work for early passage of it. In the meantime, the Government continues to pay careful attention to the status of the infection and its impact on businesses and livelihoods, and implement necessary measures in a flexible manner through utilizing the reserve fund and others.
The Bank of Japan enhances monetary easing with a view to doing its utmost to support financing mainly of firms and maintaining stability in financial market. 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
Real GDP (gross domestic product) in the July-September quarter of 2021 decreased by 0.8% on a quarterly basis (at an annual rate of 3.0%), posting negative growth for the first time in two quarters. Nominal GDP decreased by 0.6% on a quarterly basis, posting negative growth for the third consecutive quarter.
Private consumption shows movements of picking up, while some weakness remains.
As for each index, looking at Family Income and Expenditure Survey, demand-side statistics, the real consumption expenses increased by 5.0% from the previous month in September. Looking at Current Survey of Commerce, sales-side statistics, the retail sales value increased by 2.8% from the previous month in September.
Looking at the background of consumption trends, real wage income of employees is almost flat. Consumer confidence is showing movements of picking up recently.
Based on these results, private consumption shows movements of picking up, while some weakness remains.
Concerning short-term prospects, the economy is expected to show movements of picking up while economic and social activities move toward normalization.
Business investment is picking up .
Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey, including software investment) show that business investment increased in the April-June quarter of 2021 by 3.2% from the previous quarter. By industry, business investment increased for manufacturers by 3.9% from the previous quarter and increased for non-manufacturers by 2.8%.
Capital Goods Shipments and Imports, supply-side statistics, are increasing moderately.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (September 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, although excessive production capacity remains. 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 continue to be on a pick up trend mainly among machinery investment, reflecting actions in growth sectors and such, although a sense of uncertainty remains.
Housing construction has been showing movements of picking up recently.
Housing construction has been showing movements of picking up recently. Construction of owned houses is picking up. Construction of houses for rent and houses for sale is almost flat. Total number of sales of condominiums in the Tokyo metropolitan area is in a weak tone, although the contract rate remains at around 70%.
As for short-term prospects, housing construction is expected to continue to show movements of picking up.
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 September decreased by 2.6% from the previous month, the amount of contracted public works in October decreased by 5.2% from the previous month, and the amount of public works orders received in September decreased by 6.0% from the previous month.
As for short-term prospects, 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 October decreased by 99.1% 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 September increased, as export 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 decreased by 5.4% from the previous month in September. The Indices of Industrial Inventories increased by 3.4% from the previous month in September. The Survey of Production Forecast in Manufacturing expects an increase of 6.4% in October, and an increase of 5.7% in November.
By industry, transport equipment is decreasing. Production machinery is increasing at a slower pace. Electronic parts and devices are increasing moderately.
As for short-term prospects, production is expected to pick up. However, attention should be given to the further downside risk of the supply restriction and the trends in overseas economies.
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, although some severe aspects remain. The number of corporate bankruptcies is almost flat.
Corporate profits are picking up, although some weaknesses remain in non-manufacturers due to the influence of the infectious disease. During the July-September quarter of 2021, the current profits of the listed companies increased from the previous year both for manufacturers and non-manufacturers. According to the BOJ Tankan (September survey), in fiscal year 2021, sales are expected to increase by 6.1% in the first half of the year and are expected to increase by 0.7% in the second half from the previous year. Current profits are expected to increase by 43.5% in the first half and decrease by 3.9% in the second half from the previous year.
Firms' judgments on current business conditions show movements of picking up, 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, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), current business conditions rose while prospective business conditions fell.
The number of corporate bankruptcies is almost flat.
Employment situation shows steady movements in some components such as job offers, while weakness remains, due to the influence of the infectious disease.
The total unemployment rate was 2.8% in September, 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 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 showing movements of picking up. These results show that real wage income of employees is almost flat.
According to the BOJ Tankan (September 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 steady movements 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 85.9% in October, an increase of 3.4 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 29,000-yen level to the 28,600-yen level, the Nikkei Stock Average rose to the 29,700-yen 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 114-yen level.