Monthly Economic ReportExecutive Summary( may 2022 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy shows movements of picking up.
- Private consumption has shown movements of 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.
- The employment situation shows movements of picking up.
- Consumer prices have been rising recently.
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, full attention should be given to the downside risks due to supply-side constraints, rising raw material prices and fluctuations in the financial and capital markets while there are concerns regarding the effects of the re-spread of the Novel Coronavirus in China and lengthening 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.
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, which compiled on April 26, in order to respond urgently and agilely to the impact of soaring crude oil prices and commodity prices triggered by the situation in Ukraine on people's lives and economic activities, and to ensure the recovery of socio-economic activities from the COVID-19 crisis. Furthermore, the government will work for early passage of the FY2022 supplementary budget to the current Diet session that will secure reserve funds and others to respond to the unforeseen fiscal demands that come alongside the possibility of a resurgence of COVID-19 infections or of further increases in crude oil and commodity prices.
In addition, the government will compile the vision and the action plan of a New Form of Capitalism and our Basic Policy on Economic and Fiscal Management and Reform 2022 by June and then give concrete shape to the comprehensive measures for advancing these initiatives.
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 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 January-March quarter of 2022 decreased by 0.2% on a quarterly basis (at an annual rate of 1.0%), posting negative growth for the first time in two quarters. Nominal GDP increased by 0.1% on a quarterly basis, posting positive growth for the second consecutive quarter.
Private consumption has shown movements of picking up recently.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, the real consumption expenses increased by 4.1% from the previous month in March. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 1.7% from the previous month in March.
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 has shown movements of picking up recently.
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 (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, which comprise supply-side statistics, are showing movements of picking up.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (March survey), planned business investment for all industries in fiscal year 2021 is expected to increase. Planned business investment in fiscal year 2022 is expected to increase. In the BOJ Tankan, firms' judgment on production capacity is almost flat. The figures for Orders Received for Machinery, a leading indicator, appear to be pausing for 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 is almost flat.
Housing construction is almost flat. Construction of owned houses has shown weakness. Construction of houses for rent is almost flat. 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 remain flat for the time being.
Public investment has shown a steady undertone recently.
Public investment has shown a steady undertone recently. The amount of public construction completed in March increased by 1.1% from the previous month, the amount of contracted public works in April decreased by 3.4% from the previous month, and the amount of public works orders received in March increased by 27.9% 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 have been in a weak tone recently. 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. and the EU have been showing movements of picking up recently. Exports to other regions are almost flat. As for the effects of the infectious disease on inbound tourism, the number of foreign tourists in April decreased by 95.2% from 2019. As for short-term prospects, exports are expected to pick up, mainly reflecting the improvement in Western economies. However, attention should be given to the downside risks due to supply-side constraints and other factors while there are concerns regarding the effects of the re-spread of the Novel Coronavirus in China.
Imports have been in a weak tone recently. By region, imports from Asia have been in a weak tone recently. Imports from the U.S. and the EU are almost flat. Concerning short-term prospects, the economy is 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 the downside risks due to supply-side constraints and other factors while there are concerns regarding the effects of the re-spread of the Novel Coronavirus in China.
The balance of goods and services is in deficit.
The deficit in the balance of trade in March decreased, as export 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 increased by 0.3% from the previous month in March. The Indices of Industrial Inventories decreased by 0.4% from the previous month in March. The Survey of Production Forecast in Manufacturing expects an increase of 5.8% in April, and a decrease of 0.8% in May.
By industry, transport equipment is pausing for 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 downside risks due to supply-side constraints and other factors while there are concerns regarding the effects of the re-spread of the Novel Coronavirus in China.
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. During the January-March 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 (March survey), in fiscal year 2022, sales are expected to increase by 2.7% in the first half of the year and are expected to increase by 1.5% in the second half from the previous year. Current profits are expected to decrease by 2.5% in the first half and increase by 0.9% in the second half from the previous year.
Firms' judgments on current business conditions appear to be pausing for picking up. The BOJ Tankan (March survey) revealed that firms' judgment on current business conditions fell for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business conditions as of June, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (April survey), current and prospective business conditions both rose.
The number of corporate bankruptcies is almost flat.
The employment situation shows movements of picking up.
The total unemployment rate was 2.6% in March, a decrease of 0.1 percentage points from the previous month. The labor force and the number of employed persons increased, while the number of unemployed persons decreased.
The employment rate is almost flat. The number of new job offers is picking up. The active job openings to applicants ratio is showing movements of picking up. Overtime hours worked in the manufacturing industry are picking up.
As for the movement of wages, contractual cash earnings have been increasing moderately recently. The total amount of cash earnings is almost flat. These results show that real wage income of employees is almost flat.
According to the BOJ Tankan (March 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 shows movements of picking up.
As for short-term prospects of the employment situation, it is expected to pick up
3. Prices and the financial market
Producer prices are rising. Consumer prices have been rising recently.
Producer prices are rising.
Consumer prices, in terms of general, excluding fresh food and energy, have been rising recently.
According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 93.7% in April, 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 be rising for the time being.
As for stock prices, after declining from the 27,100-yen level to the 25,700-yen level, the Nikkei Stock Average rose to the 27,000-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 128-yen level to the 127-yen level, moved in the direction of depreciation to the 130-yen level, and thereafter moved in the direction of appreciation to the 127-yen level.