Monthly Economic ReportExecutive Summary( Sep 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 as the transition to a new phase of the" new normal" is underway. 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 and fluctuations in the financial and capital markets.
(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 swiftly implement additional measures compiled at the Task Force on Prices, Wages, and Daily Living on September 9. Even after that, the Government will compile comprehensive economic measures by the end of October and promptly implement them in order to respond seamlessly to the current soaring prices and other changes in the economic situation, and advance a New Form of Capitalism, while keeping the risk of a global economic slowdown fully in mind. The measures will be to respond to price hikes and to increase wages, to recover and strengthen regional earning power by taking advantage of the weak yen, to accelerate a New Form of Capitalism, and to ensure the safety and security of the people.
The Bank of Japan decided to phase out the Special Funds-Supplying Operations to Facilitate Financing in Response to the Novel Coronavirus (COVID-19) and shift to fund-provisioning that would meet a wide range of financing needs on September 22. 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 decreased by 1.4% from the previous month in July. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.7% from the previous month in July.
Looking at the background of consumption trends, real wage income of employees has been in a weak tone recently. 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 as the transition to a new phase of the“new normal” is underway.
Business investment shows movements of picking up.
Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey, including software investment) show that business investment increased in the April-June quarter of 2022 by 3.9% from the previous quarter. By industry, business investment increased for manufacturers by 7.6% from the previous quarter and increased for non-manufacturers by 1.9%.
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) (June survey) and the Business Outlook Survey (July-September 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 and the planned amount of construction, both leading indicators, are 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 has been in a weak tone recently. 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 July decreased by 0.4% from the previous month, the amount of contracted public works in August increased by 1.4% from the previous month, and the amount of public works orders received in July decreased by 6.0% 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, the U.S. and other regions are almost flat. Exports to the EU show movements of picking up. As for the effects of the infectious disease on inbound tourism, the number of foreign tourists in August decreased by 93.3% 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 and the U.S. show movements of picking up. 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 as the transition to a new phase of the “new normal” is underway. 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 July 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 increased by 0.8% from the previous month in July. The Survey of Production Forecast in Manufacturing expects an increase of 5.5% in August, and an increase of 0.8% in September.
By industry, transport equipment shows movements of picking up. Production machinery is increasing moderately. 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 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. According to the Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey), corporate profits during the April-June quarter of 2022 increased by 17.6% from the previous year and increased by 5.5% from the previous quarter. By industry, manufacturers saw an increase of 11.7% in corporate profits from the previous year, and non-manufacturers saw an increase of 21.9%. By size of company, large and medium-sized companies saw an increase of 22.1%, and small companies saw a decrease of 1.6%. 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 (August 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 July, 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 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 has been increasing moderately recently. These results show that real wage income of employees has been in a weak tone recently.
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 93.8% in August, a decrease of 0.1 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 declining from the 28,600-yen level to the 27,400-yen level, the Nikkei Stock Average rose to the 28,600-yen level, and thereafter declined to the 26,100 level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 136-yen level to the 144-yen level.