Monthly Economic ReportExecutive Summary( may 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 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 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)
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 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.
The Government will expand positive trends such as wage increases, leading to a stable virtuous cycle of wages and prices, and promote the expansion of planned and focused investment through public-private collaboration, including green transformation and innovation, to realize a virtuous cycle of growth and distribution.
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.
To this end, the Government will compile the "Basic Policies on Economic and Fiscal Management and Reform 2023 (provisional)" and other documents in June.
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.
Detailed explanations
1. Demand trends such as consumption and investment
Real GDP (gross domestic product) in the January-March quarter of 2023 increased by 0.4% on a quarterly basis (at an annual rate of 1.6%), posting positive growth for the first time in three quarters. Nominal GDP increased by 1.7% on a quarterly basis, posting positive growth for the second consecutive quarter.
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 0.8% from the previous month in March. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.3% from the previous month in March.
Looking at the background of consumption trends, real wage income of employees is in a weak tone. 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 (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) (March survey), planned business investment for all industries in fiscal year 2022 is expected to increase. Planned business investment 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 flat 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 holds firm.
Public investment holds firm. The amount of public construction completed in March decreased by 1.2% from the previous month, the amount of contracted public works in April decreased by 4.1% from the previous month, and the amount of public works orders received in March decreased by 36.0% 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., the EU and other regions are almost flat. 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 March decreased, as import values decreased. The deficit in the balance of services decreased.
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 1.1% from the previous month in March. The Indices of Industrial Inventories increased by 0.2% from the previous month in March. The Survey of Production Forecast in Manufacturing expects an increase of 4.1% in April, and a decrease of 2.0% in May.
By industry, transport equipment shows movements of 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 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 appears to be increasing.
Corporate profits are improving as a whole, although the pace has become moderate. During the January-March quarter of 2023, the current profits of the listed companies decreased from the previous year both for manufacturers and non-manufacturers. 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 (April survey), current and prospective business conditions both rose.
The number of corporate bankruptcies appears to be increasing.
The employment situation is picking up.
The total unemployment rate was 2.8% in March, an increase of 0.2 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons all increased.
The employment rate is almost flat. The number of new job offers has been on an upward trend recently. The active job openings to applicants ratio has been almost flat recently. The employment situation at private employment agencies is 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 (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 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 flat recently. Consumer prices are rising.
Producer prices have been flat 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 93.2% in April, a decrease 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 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 28,400-yen level to the 31,000-yen level, the Nikkei Stock Average declined to the 30,900-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 133-yen level to the 137-yen level, moved in the direction of appreciation to the 134-yen level, and thereafter moved in the direction of depreciation to the 138-yen level.