Monthly Economic ReportExecutive Summary( mar 2023 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is picking up moderately, although some weaknesses are seen.

Private consumption is picking up moderately.
Business investment is picking up.
Exports are in a weak tone.
Industrial production has been in a weak tone recently.
Corporate profits are improving as a whole, although the pace has become moderate. Firms' judgments on current business conditions show movements of 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, under the "new normal". 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)

The Government will thoroughly manage progress of the "Comprehensive Economic Measures for Overcoming Price Increases and Revitalizing the Economy"and the FY2022 second supplementary budget and further accelerate the implementation of them to overcome the current high prices and other difficulties, achieve a full-scale recovery of Japanese economy, and put the economy on a new growth path, and swiftly implement additional measures compiled at the Headquarters for Comprehensive Measures on Prices, Wages, and Livelihoods on March 22. Moreover, the Government will also work for early passage of the FY2023 budget and the related bills.

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.

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 increased by 2.7% from the previous month in January. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.8% from the previous month in January.

Looking at the background of consumption trends, real wage income of employees is in a weak tone. Consumer confidence has bottomed out.

Based on these results, private consumption is picking up moderately.

Concerning short-term prospects, the economy is expected to show movements of picking up under the"new normal."

Business investment is picking up.

Business investment is 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 2022 by 0.5% from the previous quarter. By industry, business investment increased for manufacturers by 0.4% from the previous quarter and increased for non-manufacturers by 0.5%.

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) (December survey), planned business investment for all industries 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 almost flat. The planned amount of construction is growing at a slower pace.

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 is in a weak tone. 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 has been in a weak tone recently.

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 January increased by 2.1% from the previous month, the amount of contracted public works in February increased by 51.7% from the previous month, and the amount of public works orders received in January decreased by 3.8% 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 in a weak tone. Imports are in a weak tone. The balance of goods and services is in deficit.

Exports are in a weak tone. By region, exports to Asia are bottoming out. Exports to the U.S. are almost flat. Exports to the EU have been in a weak tone recently. Exports to other regions show movements of picking up. As for short-term prospects, exports are expected to show weakness for the time being, due to the slowdown of overseas economies.

Imports are in a weak tone. By region, imports from Asia and the U.S. are in a weak tone. Imports from the EU are almost flat. Concerning short-term prospects, imports are expected to gradually show movements of picking up under the "new normal."

The balance of goods and services is in deficit.

The deficit in the balance of trade in January increased, as export values decreased. The deficit in the balance of services increased.

2. Corporate activities and employment

Industrial production has been in a weak tone recently.

Industrial production has been in a weak tone recently. The Indices of Industrial Production decreased by 5.3% from the previous month in January. The Indices of Industrial Inventories decreased by 1.0% from the previous month in January. The Survey of Production Forecast in Manufacturing expects an increase of 8.0% in February, and an increase of 0.7% in March.

By industry, transport equipment appears to be pausing for picking up. Production machinery has been in a weak tone recently. 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 as a whole, although the pace has become moderate. Firms' judgments on current business conditions show movements of picking up. The number of corporate bankruptcies is increasing, although it remains at a low level.

Corporate profits are improving as a whole, although the pace has become moderate. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2022 decreased by 2.8% from the previous year and decreased by 1.4% 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 5.2%. By size of company, large and medium-sized companies saw an increase of 4.0%, and small companies saw a decrease of 18.0%. According to the BOJ Tankan (December survey), in fiscal year 2022, sales are expected to increase by 9.4% in the first half of the year and are expected to increase by 6.1% in the second half from the previous year. Current profits are expected to increase by 21.6% in the first half and decrease by 5.4% 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, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (February survey), current business conditions rose while prospective business conditions fell.

The number of corporate bankruptcies is increasing, although it remains at a low level.

The employment situation is picking up.

The total unemployment rate was 2.4% in January, 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 and the number of new job offers are almost flat. The active job openings to applicants ratio and the employment situation at private employment agencies are picking up. Overtime hours worked in the manufacturing industry decreased.

As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing moderately. Real wage income of employees is in a weak tone.

According to the BOJ Tankan (December survey), DI for firms' judgment on current employment conditions was -31, showing that the sense of a labor shortage increased by 3 points from the September survey (-28).

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 have been rising at a slower tempo recently.

Producer prices have been rising at a slower tempo 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 94.3% in February, an increase of 0.5 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 27,100-yen level to the 28,600-yen level, the Nikkei Stock Average declined to the 27,000-yen level, and thereafter rose to the 27,300 level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 134-yen level to the 137-yen level, moved in the direction of appreciation to the 132-yen level, and thereafter moved in the direction of depreciation to the 133-yen level.

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