Monthly Economic ReportExecutive Summary( Aug 2022 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is picking up moderately.
- Private consumption is picking up moderately.
- Business investment shows movements of picking up.
- Exports are almost flat.
- Industrial production shows movements of picking up.
- Corporate profits are improving as a whole, although some weaknesses remain. Firms' judgments on current business conditions appear to be pausing for picking up.
- The employment situation is picking up.
- Consumer prices are rising.
Concerning short-term prospects, the economy is expected to show movements of picking up, supported by the effects of the policies while all possible measures are being taken against infectious diseases, and economic and social activities proceed to normalization. However, slowing down of overseas economies due to global monetary tightening and other factors is downside risk of the Japanese economy. Also, full attention should be given to impact of price increases on households and businesses and supply-side constraints.
(Policy stance)
In the face of a range of issues, including COVID-19 infections, soaring commodity prices worldwide, and ensuring a stable energy supply, the Government will mobilize all policy measures to defend Japanese people's daily lives and also the Japanese economy.
The Government will continue to maintain the framework of economic and fiscal management for joint promotion of bold monetary policies, flexible fiscal policies, and growth strategies that will encourage private investment. The macroeconomy will be managed flexibly without hesitation to achieve autonomous growth led by private demand, and to break away from deflation.
The Government will implement the "Economic Measures for Overcoming Coronavirus Infections and Opening Up a New Era", the FY2021 supplementary budget, and the FY2022 budget swiftly and properly. Also, the Government will implement Comprehensive Emergency Measures to Counter Soaring Crude Oil and other Prices under the COVID-19 Pandemic. At the Task Force on Prices, Wages, and Daily Living, the Government will compile additional measures by early September to promptly respond to the current price and economic situation, and will implement them swiftly by making flexible use of reserve funds. In addition, the Government will take bold measures seamlessly, without being bound by precedent, depending on the situation.
In addition, the government will steadily implement policy measures that we have included in the vision and the action plan of a New Form of Capitalism and our Basic Policy on Economic and Fiscal Management and Reform 2022 ,which the Cabinet decided on June 7th, and then give concrete shape immediately to the comprehensive measures for advancing these initiatives and put into practice.
The Bank of Japan continues monetary easing with a view to doing its utmost to support financing mainly of small and medium-sized firms and maintaining stability in financial market. The Government expects the Bank of Japan to achieve the price stability target of two percent in a sustainable and stable manner 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 April-June quarter of 2022 increased by 0.5% on a quarterly basis (at an annual rate of 2.2%), posting positive growth for the third consecutive quarter. Nominal GDP increased by 0.3% on a quarterly basis, posting positive growth for the third consecutive quarter.
Private consumption is picking up moderately.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, real consumption expenses increased by 1.5% from the previous month in June. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value decreased by 1.3% from the previous month in June.
Looking at the background of consumption trends, real wage income of employees is almost flat. Consumer confidence is in a weak tone.
Based on these results, private consumption is picking up moderately.
Concerning short-term prospects, the economy is expected to show movements of picking up while all possible measures are being taken against infectious diseases, and economic and social activities proceed to normalization.
Business investment shows movements of picking up.
Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey, including software investment) show that business investment increased in the January-March quarter of 2022 by 0.3% from the previous quarter. By industry, business investment increased for manufacturers by 1.7% from the previous quarter and decreased for non-manufacturers by 0.3%.
Capital Goods Shipments and Imports, which comprise supply-side statistics, are showing movements of picking up.
Acording to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (June survey), planned business investment for all industries in fiscal year 2022 is expected to increase. In the BOJ Tankan, firms#39judgment on production capacity is almost flat. The figures for Orders Received for Machinery, a leading indicator, show movements of picking up. The planned amount of construction is picking up.
As for short-term prospects, business investment is expected to continue to be on a pickup trend, mainly reflecting the improvement of corporate profits.
Housing construction has shown a steady undertone.
Housing construction has shown a steady undertone. Construction of owned houses is flat. Construction of houses for rent and houses for sale has shown a steady undertone. In addition, the total number of sales of condominiums in the Tokyo metropolitan area is almost flat.
As for short-term prospects, housing construction is expected to show steady movements.
Public investment is intensified.
Public investment is intensified. The amount of public construction completed in June increased by 2.6% from the previous month, the amount of contracted public works in July decreased by 9.0% from the previous month, and the amount of public works orders received in June increased by 10.4% 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 almost flat. Imports show movements of picking up. The balance of goods and services is in deficit.
Exports are almost flat. By region, exports to Asia have shown movements of picking up recently. Exports to the U.S. are almost flat. Exports to EU show movements of picking up. Exports to other regions are in a weak tone. As for the effects of the infectious disease on inbound tourism, the number of foreign tourists in July decreased by 95.2% from 2019. As for short-term prospects, exports are expected to remain flat for the time being. However, attention should be given to the impact of the slowing down of overseas economies and other factors.
Imports show movements of picking up. By region, imports from Asia show movements of picking up. Imports from the U.S. are almost flat. Imports from the EU have been in a weak tone recently. Concerning short-term prospects, imports are expected to gradually show movements of picking up while all possible measures are being taken against infectious diseases, and economic and social activities proceed to normalization. However, attention should be given to supply-side constraints and other factors.
The balance of goods and services is in deficit.
The deficit in the balance of trade in June increased, as import values increased. The deficit in the balance of services decreased.
2. Corporate activities and employment
Industrial production shows movements of picking up.
Industrial production shows movements of picking up. The Indices of Industrial Production increased by 9.2% from the previous month in June. The Indices of Industrial Inventories increased by 1.9% from the previous month in June. The Survey of Production Forecast in Manufacturing expects an increase of 3.8% in July, and an increase of 6.0% in August.
By industry, transport equipment shows movements of picking up. Production machinery and electronic parts and devices are increasing moderately.
As for short-term prospects, production is expected to continue to show movements of picking up. However, attention should be given to the impact of the slowing down of overseas economies and other factors.
Corporate profits are improving as a whole, although some weaknesses remain. Firms' judgments on current business conditions appear to be pausing for picking up. The number of corporate bankruptcies is almost flat.
Corporate profits are improving as a whole, although some weaknesses remain. During the April-June quarter of 2022, the current profits of the listed companies increased from the previous year both for manufacturers and non-manufacturers. According to the BOJ Tankan (June survey), in fiscal year 2022, sales are expected to increase by 5.9% in the first half of the year and are expected to increase by 3.0% in the second half from the previous year. Current profits are expected to decrease by 1.5% in the first half and decrease by 5.6% in the second half from the previous year.
Firms' judgments on current business conditions appear to be pausing for picking up. The BOJ Tankan (June 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 September, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (July survey), current business conditions fell while prospective business conditions rose.
The number of corporate bankruptcies is almost flat.
The employment situation is picking up.
The total unemployment rate was 2.6% in June, the same level as the previous month. The labor force and the number of employed persons increased, while the number of unemployed persons was flat.
The employment rate is picking up. The number of new job offers, the active job openings to applicants ratio, and overtime hours worked in the manufacturing industry are picking up.
As for the movement of wages, contractual cash earnings are increasing moderately. The total amount of cash earnings is picking up. These results show that real wage income of employees is almost flat.
According to the BOJ Tankan (June 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 are picking up.
Based on these results, the employment situation is picking up.
As for short-term prospects of the employment situation, it is expected to continue to pick up.
3. Prices and the financial market
Producer prices are rising. Consumer prices are rising.
Producer prices are rising.
Consumer prices, in terms of general, excluding fresh food and energy, are rising.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 93.9% in July, a decrease of 0.3 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to continue rising for the time being.
As for stock prices, after rising from the 27,700-yen level to the 29,200-yen level, the Nikkei Stock Average declined to the 28,400-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 136-yen level to the 130-yen level, moved in the direction of depreciation to the 137-yen level.