Monthly Economic ReportExecutive Summary( Jan 2022 )
(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 shows movements of 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 taking all possible measures against infectious diseases and continuing economic and social activities. However, full attention should be given to the further increase in downside risks due to the effects of the Novel Coronavirus and supply-side constraints and raw material prices. 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. In order to extricate Japan from deflation, bold monetary policy, flexible fiscal policy, and the promotion of growth strategies will be engaged in.
The Government decided to implement priority measures such as for prevention of the spread of disease in designate 3 prefectures from January 9 through 31. The Government will ensure that the medical systems established to prepare for the re-spread of infections are run properly. In addition, the Government will maintain the framework for border control measures and further strengthen the series of steps of prevention, testing, and early treatment to prepare for the worst-case scenario. Regarding the COVID-19 vaccine, the pace of the third dose for medical personnel and the elderly will be further accelerated, and after March, the third dose for the general public will also be accelerated, and the Government will create an environment where socioeconomic activities can continue as much as possible, ensuring safety and security.
The Government will support the current economy while paying close attention to downside risks. Even in a situation where the infection is re-spreading, 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, and work for early passage of the FY2022 budget and the related bills.
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 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 decreased by 1.2% from the previous month in November. Looking at Current Survey of Commerce, sales-side statistics, the retail sales value increased by 1.2% from the previous month in November.
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, private consumption is expected to continue to pick up while taking all possible measures against infectious diseases and continuing economic and social activities.
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 and houses for rent is almost flat. Construction of houses for sale has been in a weak tone recently. 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 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 December increased by 0.4% from the previous month, and the amount of public works orders received in November increased by 2.0% 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. The balance of goods and services is in deficit.
Exports are almost flat. By region, exports to Asia are in a weak tone. Exports to the U.S. and the EU are almost flat. Exports to other regions are showing movements of picking up 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 trends in overseas economies and the supply restriction.
Imports are in a weak tone. By region, imports from Asia are in a weak tone. Imports from the U.S. and the EU are pausing. As for short-term prospects, the economy is expected to gradually show movements of picking up while taking all possible measures against infectious diseases and continuing economic and social activities. However, attention should be given to the further downside risk of the effects of infections, the supply restriction and others.
The balance of goods and services is in deficit.
The balance of trade in November turned to surplus, as export 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 7.2% from the previous month in November. The Indices of Industrial Inventories increased by 1.7% from the previous month in November. The Survey of Production Forecast in Manufacturing expects an increase of 1.6% in December, and an increase of 5.0% in January.
By industry, transport equipment is 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 continue to show movements of picking 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.
Corporate profits are picking up, although some weaknesses remain in non-manufacturers due to the influence of the infectious disease. According to the Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey), corporate profits during the July-September quarter of 2021 increased by 35.1% from the previous year and decreased by 7.4% from the previous quarter. By industry, manufacturers saw an increase of 71.0% in corporate profits from the previous year, and non-manufacturers saw an increase of 17.0% By size of company, large and medium-sized companies saw an increase of 38.0% from the previous year, and small companies saw an increase of 26.9%. According to the BOJ Tankan (December survey), in fiscal year 2021, sales are expected to increase by 6.7% in the first half of the year and are expected to increase by 1.3% in the second half from the previous year. Current profits are expected to increase by 69.8% in the first half and increase by 0.3% in the second half from the previous year.
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 (December survey), current and prospective business conditions both 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 2.8% in November, an increase of 0.1 percentage points from the previous month. The labor force and the number of unemployed persons have increased while the number of employed persons has been flat.
The number of employees is almost flat. The number of new job offers is showing movements of picking up, 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.
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 at a slower tempo recently. Consumer prices show steady movements.
Producer prices are rising at a slower tempo recently.
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 88.5% in December, an increase of 0.9 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 rising from the 28,500-yen level to the 29,300-yen level, the Nikkei Stock Average declined to the 28,100-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 114-yen level to the 116-yen level, moved in the direction of appreciation to the 114-yen level.