Monthly Economic ReportExecutive Summary( jun 2023 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace.
- Private consumption is picking up.
- Business investment is picking up.
- Exports have shown a steady undertone.
- Industrial production shows signs of picking up.
- Corporate profits are improving moderately as a whole. Firms' judgments on current business conditions show movements of picking up.
- The employment situation has shown movements of improvement recently.
- Consumer prices are rising.
Concerning short-term prospects, the economy is expected to continue recovering at a moderate pace with the improving employment and income situation, supported by the effects of the policies. 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 and fluctuations in the financial and capital markets.
(Policy stance)
Based on the "Basic Policies for Economic and Fiscal Management and Reform 2023" approved by the Cabinet on June 16, the Goverment will accelerate the iniciative of new capitalism to expand future investment and realize structural wage increases, in order to expand more positive trends such as the highest level of wage increases in this 30 years and high investment motivation in the private sector.
The Government will swiftly and steadily implement the “Comprehensive Economic Measures for Overcoming Price Increases and Revitalizing the Economy” and the FY2022 second supplementary budget, additional measures compiled at the Headquarters for Comprehensive Measures on Prices, Wages, and Livelihoods, and the FY2023 budget, and will continue to respond with flexibility based on price and economic trends.
The Goverment will aiming for realization of "virtuous circle of growth and distribution" which rationaled by an increase in growth potential and a broad increases in household income, by linking it to a "virtuous circle of wages and prices" with wage increases and securing appropriate price transfers and markups for costs, as well as through continuous expansion of domestic investment by public and private sector’s partnership in the areas of human resources, green and economic security which would easily be underinvested if simply left to markets principle.
The Government expects the Bank of Japan to achieve the price stability target of two percent in a sustainable and stable manner, accompanied by wage increases, in light of economic activity, prices and financial conditions.
Through these measures, the Goverment will promote bold monetary policy, flexible fiscal policy, and a growth strategy that stimulates private investment in an integrated manner, while fostering widespread recognition that will not fall back into deflation, and leading to an end to deflation through these policy initiatives.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption is picking up.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, real consumption expenses decreased by 1.3% from the previous month in April. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value decreased by 1.1% from the previous month in April.
Looking at the background of consumption trends, real wage income of employees has bottomed out. Consumer confidence is picking up.
Based on these results, private consumption is picking up.
Concerning short-term prospects, consumption is expected to continue to pick up, supported by the improvement in the employment and income situations.
Business investment is picking up.
Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey, including software investment) show that business investment increased in the January-March quarter of 2023 by 2.3% from the previous quarter. By industry, business investment increased for manufacturers by 4.8% from the previous quarter and increased for non-manufacturers by 1.0%.
Capital Goods Shipments and Imports, which comprise supply-side statistics, appear to be pausing for picking up.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (March survey) and the Business Outlook Survey (April-June survey), planned business investment for all industries in fiscal year 2023 is expected to increase. In BOJ Tankan, firms' judgment on production capacity indicates their sense of shortage on the whole, although feelings of excess can be seen among manufacturers. The figures for Orders Received for Machinery and the planned amount of construction, both leading indicators, are almost flat.
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 has been in a weak tone recently. Construction of houses for rent has shown a steady undertone. Construction of houses for sale has shown a steady undertone, although construction of collective houses in April was far below the level of previous years. 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 April increased by 2.9% from the previous month, the amount of contracted public works in May increased by 3.0% from the previous month, and the amount of public works orders received in April decreased by 8.2% 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 have shown a steady undertone. Imports are almost flat. The balance of goods and services is in deficit.
Exports have shown a steady undertone. By region, exports to Asia, the U.S. and the EU are almost flat. Exports to other regions have been showing movements of picking up recently. As for short-term prospects, exports are expected to show steady movements. However, attention should be given to the downside risks of overseas economies.
Imports are almost flat. By region, imports from Asia, the U.S. and the EU are almost flat. Concerning short-term prospects, imports are expected to gradually show movements of picking up.
The balance of goods and services is in deficit.
The deficit in the balance of trade in April decreased, as export values increased while import values decreased. The balance of services turned to surplus.
2. Corporate activities and employment
Industrial production shows signs of picking up.
Industrial production shows signs of picking up. The Indices of Industrial Production increased by 0.7% from the previous month in April. The Indices of Industrial Inventories decreased by 0.1% from the previous month in April. The Survey of Production Forecast in Manufacturing expects an increase of 1.9% in May, and an increase of 1.2% in June.
By industry, transport equipment is picking up. Production machinery is almost flat. Electronic parts and devices are decreasing.
As for short-term prospects, production is expected to pick up, though attention should be given to the impact of the slowing down of overseas economies and other factors.
Corporate profits are improving moderately as a whole. Firms' judgments on current business conditions show movements of picking up. The number of corporate bankruptcies appears to be increasing.
Corporate profits are improving moderately as a whole. According to the Quarterly Financial Statements Statistics of Corporations by Industry (January-March survey), corporate profits during the January-March quarter of 2023 increased by 4.3% from the previous year and increased by 6.2% from the previous quarter. By industry, manufacturers saw a decrease of 15.7% in corporate profits from the previous year, and non-manufacturers saw an increase of 17.2%. By size of company, large and medium-sized companies saw a decrease of 0.5% from the previous year, and small companies saw an increase of 16.8%. According to the BOJ Tankan (March survey), in fiscal year 2023, sales are expected to increase by 1.5% in the first half of the year and are expected to increase by 0.8% in the second half from the previous year. Current profits are expected to decrease by 5.7% in the first half and increase by 1.0% in the second half from the previous year.
Firms' judgments on current business conditions show movements of 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 (May survey), current and prospective business conditions both rose.
The number of corporate bankruptcies appears to be increasing.
The employment situation has shown movements of improvement recently.
The total unemployment rate was 2.6% in April, a decrease of 0.2 percentage points from the previous month. The labor force and the number of unemployed persons decreased while the number of employed persons increased.
The employment rate has shown movements of improvement recently. The number of new job offers and the active job openings to applicants ratio have been almost flat recently. The employment situation at private employment agencies is picking up. Overtime hours worked in the manufacturing industry increased.
As for the movement of wages, contractual cash earnings have been increasing recently. The total amount of cash earnings is increasing moderately. Real wage income of employees has bottomed out.
According to the BOJ Tankan (March survey), DI for firms' judgment on current employment conditions was -32, showing that the sense of a labor shortage increased by 1 point from the December survey (-31).
Based on these results, the employment situation has shown movements of improvement recently.
As for short-term prospects of the employment situation, it is expected to improve.
3. Prices and the financial market
Producer prices have been declining moderately recently. Consumer prices are rising.
Producer prices have been declining moderately recently.
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 93.1% in May, 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, on the basis of excluding special factors in the form of policy measures, etc.
As for stock prices, after rising from the 30,900-yen level to the 33,700-yen level, the Nikkei Stock Average declined to the 33,300-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 139-yen level to the 140-yen level, moved in the direction of appreciation to the 138-yen level, and thereafter moved in the direction of depreciation to the 142-yen level.