Monthly Economic ReportExecutive Summary( mar 2022 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy continues to show movements of picking up, although some weaknesses are seen as a severe situation due to the Novel Coronavirus remains.
- Private consumption appears to be pausing for picking up recently.
- 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 in non-manufacturers due to the influence of the infectious disease. Firms' judgments on current business conditions appear to be pausing for 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 are rising moderately recently.
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 all possible measures are being taken against infectious diseases and economic and social activities move toward normalization. However, full attention should be given to the further increase in downside risks due to rising raw material prices and fluctuations in the financial and capital markets and supply-side constraints while the uncertainties surrounding the state of affairs of Ukraine. Also attention should be given to the effects of the Novel Coronavirus.
(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.
he Government decided to extend priority measures such as for prevention of the spread of disease in thirteen prefectures and to apply them additionally to one prefecture on February 10, and is now implementing them in designate 36 prefectures. The Government will further strengthen well-balanced measures based on the characteristics of the Omicron strain. The Government will work to strengthen infection prevention measures in schools, nursery schools, and elderly care facilities, improve temporary medical and other facilities, and steadily accelerate the third dose of vaccine based on the target of one million doses per day. Through these efforts, the Government will create an environment where socioeconomic activities can continue as much as possible, ensuring safety and security. The Government will consider easing border control measures.
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. Furthermore, in light of the current situation where oil prices are soaring, the Government will respond flexibly in order to minimize the impact on people's daily lives and economic activities.
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 appears to be pausing for 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 January. Looking at Current Survey of Commerce, sales-side statistics, the retail sales value decreased by 0.9% from the previous month in January.
Looking at the background of consumption trends, real wage income of employees is almost flat. Consumer confidence has been in a weak tone recently.
Based on these results, private consumption appears to be pausing for picking up recently.
Concerning short-term prospects, private consumption is expected to show movements of picking up while all possible measures are being taken against infectious diseases and economic and social activities move toward normalization.
Business investment shows movements of picking up.
Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey, including software investment) show that business investment increased in the October-December quarter of 2021 by 3.4% from the previous quarter. By industry, business investment increased for manufacturers by 3.4% from the previous quarter and increased for non-manufacturers by 3.3%.
Capital Goods Shipments and Imports, supply-side statistics, are showing movements of picking up.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (December survey) and the Business Outlook Survey (January-March survey), planned business investment for all industries in fiscal year 2021 is expected to increase. According to the Business Outlook Survey (January-March survey), planned business investment 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, are picking up. The planned amount of construction shows movements of 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 been in a weak tone recently.
Housing construction has been in a weak tone recently. Construction of owned houses has shown weakness recently. Construction of houses for rent has been in a weak tone recently. Construction of houses for sale is almost flat. In addition, the total number of sales of condominiums in the Tokyo metropolitan area has been showing movements of picking up recently.
As for short-term prospects, housing construction is expected to remain in a weak tone 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 January decreased by 2.0% from the previous month, the amount of contracted public works in February increased by 0.7% from the previous month, and the amount of public works orders received in January decreased by 2.1% 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 almost flat. The balance of goods and services is in deficit.
Exports are almost flat. By region, exports to Asia, the U.S., the EU and other regions are almost flat. As for effects of the infectious disease on inbound tourism, the number of foreign tourists in February decreased by 99.4% 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 and others.
Imports are almost flat. By region, imports from Asia, the U.S. and the EU are almost flat. As for 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 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 January increased, as import values increased. The deficit in the balance of services increased.
2. Corporate activities and employment
Industrial production shows movements of picking up.
Industrial production shows movements of picking up. The Indices of Industrial Production decreased by 0.8% from the previous month in January. The Indices of Industrial Inventories decreased by 1.4% from the previous month in January. The Survey of Production Forecast in Manufacturing expects an increase of 5.7% in February, and an increase of 0.1% in March.
By industry, transport equipment is 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 further downside risk of the trends in overseas economies and the supply restriction.
Corporate profits are improving as a whole, although some weaknesses remain in non-manufacturers due to the influence of the infectious disease. 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 in non-manufacturers due to the influence of the infectious disease. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2021 increased by 24.7% from the previous year and increased by 17.4% from the previous quarter. By industry, manufacturers saw an increase of 22.1% from the previous year, and non-manufacturers saw an increase of 26.4% from the previous year. By size of company, large and medium-sized companies saw an increase of 27.1% from the previous year, and small companies saw an increase of 19.8%. 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 appear to be pausing for 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 (February 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 January, an increase of 0.1 percentage points from the previous month. The labor force and the number of employed persons decreased, while the number of unemployed persons increased.
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 picking up recently.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are almost flat. 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, the 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 have been rising recently. Consumer prices are rising moderately recently.
Producer prices have been rising recently.
Consumer prices, in terms of general, excluding fresh food and energy, are rising moderately recently 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 91.7% in February, an increase of 2.0 percentage points from the previous month.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise moderately 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 27,100-yen level to the 24,700-yen level, the Nikkei Stock Average rose to the 28,000-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 114-yen level to the 121-yen level.