Monthly Economic ReportExecutive Summary( nov 2023 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing in part.
- Private consumption is picking up.
- Business investment appears to be pausing for picking up.
- Exports show movements of picking up recently.
- Industrial production shows signs of picking up.
- Corporate profits are improving as a whole. Firms' judgments on current business conditions are improving moderately as a whole.
- The employment situation shows movements of improvement.
- 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, including the effects of global monetary tightening and the concern about the prospect of the Chinese economy. Also, full attention should be given to price increases, the situation in the Middle East and fluctuations in the financial and capital markets.
(Policy stance)
The Government will accelerate the initiative of new capitalism to transform the economy from a cost-cutting economy that has been in place for 30 years to a growth-oriented economy driven by sustained wage increases and active investment.
To this end, the Government will compliment “Comprehensive Economic Measures for Completely Break Free from Deflation: Toward New Stage of the Japanese Economy”(Nov 2nd , Cabinet decision), formulated to lead to a strong cycle of investment and consumption through measures to strengthen supply side that will powerfully promote change and measures to improve people's sense of well-being which will strengthen current fluctuating economy and will overcome high prices of commodities. The Government will exert every effort for early passage of the FY2023 supplementary budget.
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 Government 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
Real GDP (gross domestic product) in the July-September quarter of 2023 decreased by 0.5% on a quarterly basis (at an annual rate of 2.1%), posting negative growth for the first time in three quarters. Nominal GDP decreased by 0.0% on a quarterly basis, posting negative growth for the first time in four quarters.
Private consumption is picking up.
According to Quarterly Estimates of GDP for July-September 2023 (First Preliminary Estimates), the real term of private consumption decreased by 0.0% from the previous quarter. According to Consumption Trend Index (CTI), the real term of Total Consumption Trend Index (CTI macro) increased by 0.0% from the previous month in September.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, real consumption expenses increased by 0.3% from the previous month in September. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.4% from the previous month in September.
Looking at the background of consumption trends, real wage income of employees has been showing movements of picking up recently. Consumer confidence has appeared to be pausing for picking up recently.
Moreover, based on the interview results, new automobile sales and home appliance sales are almost flat. Travel is picking up. Eating-out is increasing moderately.
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. However, attention should be given to the trends in consumer confidence.
Business investment appears to be pausing for picking up.
Business investment appears to be pausing for picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey, including software investment) show that business investment decreased in the April-June quarter of 2023 by 1.2% from the previous quarter. By industry, business investment increased for manufacturers by 1.2% from the previous quarter and decreased for non-manufacturers by 2.5%.
Capital Goods Shipments and Imports, which comprise supply-side statistics on investment in machinery and equipment, appear to be pausing for picking up. Software investment is increasing.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (September 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, a leading indicator, are almost flat. The planned amount of construction shows movements of picking up.
As for short-term prospects, business investment is expected to pick up, mainly reflecting steady corporate profits.
Housing construction is in a weak tone.
Housing construction is in a weak tone. Construction of owned houses has been flat recently. Construction of houses for rent is flat. Construction of houses for sale is in a weak tone. 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 in a weak tone for the time being.
Public investment holds firm.
Public investment holds firm. The amount of public construction completed in September increased by 0.7% from the previous month, the amount of contracted public works in October decreased by 7.9% from the previous month, and the amount of public works orders received in September increased by 3.4% 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 show movements of picking up recently. Imports are almost flat. The balance of goods and services is in deficit.
Exports show movements of picking up recently. By region, exports to Asia have shown movements of picking up recently. Exports to the U.S have been picking up recently. Exports to the EU and other regions are almost flat. As for short-term prospects, exports are expected to continue to show movements of picking up. However, attention should be given to the downside risks of overseas economies.
Imports are almost flat. By region, imports from Asia and the U.S. are almost flat. Imports from the EU have been pausing recently. 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 September decreased, as export values increased. 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 0.5% from the previous month in September. The Indices of Industrial Inventories decreased by 1.3% from the previous month in September. The Survey of Production Forecast in Manufacturing expects an increase of 3.9% in October, and a decrease of 2.8% in November.
By industry, transport equipment has shown a steady undertone. Production machinery is almost flat. Electronic parts and devices are showing movements of picking up with fluctuations.
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.
Tertiary industry activity is picking up.
Corporate profits are improving as a whole. Firms’ judgments on current business conditions are improving moderately as a whole. The number of corporate bankruptcies appears to be increasing.
Corporate profits are improving as a whole. During the July-September quarter of 2023, the current profits of the listed companies increased from the previous year for manufacturers and decreased for non-manufacturers. According to the BOJ Tankan (September survey), in fiscal year 2023, sales are expected to increase by 2.5% in the first half of the year and are expected to increase by 1.4% in the second half from the previous year. Current profits are expected to decrease by 3.8% in the first half and decrease by 1.5% in the second half from the previous year.
Firms' judgments on current business conditions are improving moderately as a whole. The BOJ Tankan (September 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 December, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (October survey), current business conditions fell while prospective business conditions remained unchanged.
The number of corporate bankruptcies appears to be increasing. The number of corporate bankruptcies was 720 in September and 793 in October. Total liabilities are 691.9 billion yen in September and 308.0 billion yen in October.
The employment situation shows movements of improvement.
The total unemployment rate was 2.6% in September, a decrease of 0.1 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 is increasing moderately. The number of new job offers is almost flat. 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 increased.
As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing. Real wage income of employees has been showing movements of picking up recently.
According to the BOJ Tankan (September survey), DI for firms’ judgment on current employment conditions was -33, showing that the sense of a labor shortage increased by 1 point from the June survey (-32).
Based on these results, the employment situation shows movements of improvement.
As for short-term prospects of the employment situation, it is expected to improve.
3. Prices and the financial market
Producer prices is flat. Consumer prices are rising.
Producer prices is flat.
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.
Consumer prices, in terms of general, excluding fresh food (referred to as "core") are rising.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 10.8% expected a rise of less than 2% (10.2% in the previous month), 32.9% expected a rise of 2 to 5% (32.4% in the previous month), and 48.8% expected a rise of 5% or more (51.1% in the previous month) in October.
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 30,800-yen level to the 33,500-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 149-yen level to the 151-yen level, moved in the direction of appreciation to the 149-yen level.