Monthly Economic ReportExecutive Summary( dec 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 is picking up.
- Exports are almost flat.
- Industrial production appears to be pausing for picking up.
- Corporate profits are improving as a whole, although some weaknesses remain. Firms' judgments on current business conditions show movements of 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, under the "new normal".However, slowing down of overseas economies is downside risk of the Japanese economy, amid ongoing global monetary tightening and other factors. Also, full attention should be given to price increases, supply-side constraints, fluctuations in the financial and capital markets and infection trends in China.
(Policy stance)
The Government will thoroughly manage progress of the "Comprehensive Economic Measures for Overcoming Price Increases and Revitalizing the Economy" (October 28th, Cabinet decision) and the FY2022 second supplementary budget and implement them swiftly and steadily to revitalize the Japanese economy by overcoming the current difficulties such as the rise in prices and putting the Japanese economy on a sustainable, higher growth path for the future. Moreover, the Government will compile the FY2023 budget in light of the "Basic Principles of FY2023 Budget Formulation" (December 2nd, Cabinet Decision) and the "Fiscal 2023 Economic Outlook and Basic Stance for Economic and Fiscal Management" (to be approved).
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 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
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 1.1% from the previous month in October. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.3% from the previous month in October.
Looking at the background of consumption trends, real wage income of employees is in a weak tone. Consumer confidence has been weak.
Based on these results, private consumption is picking up moderately.
Concerning short-term prospects, the economy is expected to show movements of picking up under the"new normal."
Business investment is picking up.
Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey, including software investment) show that business investment increased in the July-September quarter of 2022 by 2.4% from the previous quarter. By industry, business investment decreased for manufacturers by 2.3% from the previous quarter and increased for non-manufacturers by 5.1%.
Capital Goods Shipments and Imports, which comprise supply-side statistics, are picking up.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (December survey), planned business investment for all industries in fiscal year 2022 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, have been growing at a slower pace recently. The planned amount of construction is on an upward trend.
As for short-term prospects, business investment is expected to continue to be on a pickup trend, mainly reflecting steady 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 has been showing movements of picking up recently. Construction of 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 holds firm.
Public investment holds firm. 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 12.7% from the previous month, and the amount of public works orders received in October decreased by 0.4% from the previous month.
As for short-term prospects, public investment, partly due to the effect of the supplementary budget, is expected to show steady performance.
Exports are almost flat. Imports are almost flat. The balance of goods and services is in deficit.
Exports are almost flat. By region, exports to Asia have been in a weak tone recently. Exports to the U.S., the EU and other regions are almost flat. 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 are almost flat. By region, imports from Asia have been in a weak tone recently. Imports from the U.S. are almost flat. Imports from the EU are showing movements of picking up. Concerning short-term prospects, imports are expected to gradually show movements of picking up under the "new normal." 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 October increased, as import values increased. 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 3.2% from the previous month in October. The Indices of Industrial Inventories decreased by 0.5% from the previous month in October. The Survey of Production Forecast in Manufacturing expects an increase of 3.3% in November, and an increase of 2.4% in December.
By industry, transport equipment shows movements of picking up. Production machinery is increasing at a slower pace. Electronic parts and devices have been decreasing recently.
As for short-term prospects, production is expected to pick 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 show movements of picking up. The number of corporate bankruptcies is almost flat.
Corporate profits are improving as a whole, although some weaknesses remain. According to the Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey), corporate profits during the July-September quarter of 2022 increased by 18.3% from the previous year and decreased by 5.3% from the previous quarter. By industry, manufacturers saw an increase of 35.4% in corporate profits from the previous year, and non-manufacturers saw an increase of 5.6%. By size of company, large and medium-sized companies saw an increase of 23.8% from the previous year, and small companies saw an increase of 1.3%.
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, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (November survey), current and prospective business conditions both rose.
The number of corporate bankruptcies is almost flat.
The employment situation is picking up.
The total unemployment rate was 2.6% in October, the same level as the previous month. The labor force, the number of employed persons, and the number of unemployed persons all decreased.
The employment rate has been almost flat recently. The number of new job offers has been almost flat recently. The active job openings to applicants ratio is picking up. Overtime hours worked in the manufacturing industry have been almost flat recently.
As for the movement of wages, contractual cash earnings are increasing moderately. The total amount of cash earnings is increasing moderately. Real wage income of employees is in a weak tone.
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 employment situation in the private sector is 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 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 94.0% in November, 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, on the basis of excluding special factors in the form of policy measures, etc.
As for stock prices, the Nikkei Stock Average declined from the 28,200-yen level to the 27,200-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 139-yen level to the 134-yen level, moved in the direction of depreciation to the 136-yen level.