Monthly Economic ReportExecutive Summary( oct 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 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 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 submit a supplementary budget to the current session of the Diet and exert every effort for early passage of it.
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
Private consumption is picking up.
According to Quarterly Estimates of GDP for April-June 2023 (Second Preliminary Estimates), the real term of private consumption decreased by 0.6% from the previous quarter. According to Consumption Trend Index (CTI), the real term of Total Consumption Trend Index (CTI macro) decreased by 0.1% from the previous month in August.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, real consumption expenses increased by 3.9% from the previous month in August. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 0.2% from the previous month in August.
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 have been increasing, though with a pause seen recently. Home appliance sales are almost flat. Travel is picking up. Eating-out is picking up 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 is picking up.
Business investment is 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, are showing movements of 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 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 been in a weak tone recently.
Housing construction has been in a weak tone recently. Construction of owned houses and houses for rent has been almost flat recently. Construction of houses for sale has been in a weak tone recently. 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 August decreased by 0.4% from the previous month, the amount of contracted public works in September increased by 8.5% from the previous month, and the amount of public works orders received in August decreased by 2.4% 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 have been pausing recently. Exports to 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 August increased, as export values decreased. The deficit in the balance of services increased.
2. Corporate activities and employment
Industrial production shows signs of picking up.
Industrial production shows signs of picking up. The Indices of Industrial Production decreased by 0.7% from the previous month in August. The Indices of Industrial Inventories decreased by 1.3% from the previous month in August. The Survey of Production Forecast in Manufacturing expects an increase of 5.8% in September, and an increase of 3.8% in October.
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. According to the Quarterly Financial Statements Statistics of Corporations by Industry (April-June survey), corporate profits during the April-June quarter of 2023 increased by 11.6% from the previous year and increased by 9.5% from the previous quarter. By industry, manufacturers saw an increase of 0.4% in corporate profits from the previous year, and non-manufacturers saw an increase of 19.0%. By size of company, large and medium-sized companies saw an increase of 9.4% from the previous year, and small companies saw an increase of 23.5%. 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 (September survey), current and prospective business conditions both fell.
The number of corporate bankruptcies appears to be increasing. The number of corporate bankruptcies was 760 in August and 720 in September. Total liabilities are 108.3 billion yen in August and 691.9 billion yen in September.
The employment situation shows movements of improvement.
The total unemployment rate was 2.7% in August, the same level as the previous month. The labor force, the number of employed persons, and the number of unemployed persons all increased.
The employment rate shows movements of improvement. The number of new job offers is almost flat. Active job openings to applicants ratio is decreasing. 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. 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 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.
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, 10.2% expected a rise of less than 2% (10.1% in the previous month), 32.4% expected a rise of 2 to 5% (32.5% in the previous month), and 51.5% expected a rise of 5% or more (51.1% in the previous month) in September.
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 declining from the 32,300-yen level to the 30,500-yen level, the Nikkei Stock Average rose to the 32,400-yen level, and thereafter declined to the 30,600-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 149-yen level to the 148-yen level, moved in the direction of depreciation to the 150-yen level.