Monthly Economic ReportExecutive Summary( sep 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 picking up.
- 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 and fluctuations in the financial and capital markets.
(Policy stance)
Based on the "Basic Policies for Economic and Fiscal Management and Reform 2023", the Government will accelerate the initiative 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 implement new mitigation measure for drastic fuel price increases and extended mitigation measure for electricity and gas price increases on August 30th.
In addition, the Government will compliment Comprehensive Economic Measures targeting October end, considering following points; Firstly, protecting people's livelihoods from high prices. Secondly, enhancing the momentum of structural wage increase including MSMEs and realization of local growth. Thirdly, promoting domestic investment that contributes to strengthening and upgrading its potential. Fourthly, launching and promoting social transformation to overcome population decrease, and lastly, ensuring the safety and security of the public.
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) increased by 0.2% from the previous month in July.
As for each index, looking at Family Income and Expenditure Survey, which comprises demand-side statistics, real consumption expenses decreased by 2.7% from the previous month in July. Looking at Current Survey of Commerce, which comprises sales-side statistics, the retail sales value increased by 2.2% from the previous month in July.
Looking at the background of consumption trends, real wage income of employees has been showing movements of picking up recently. Consumer confidence is picking up.
Moreover, based on the interview results, new automobile sales have been increasing, though with a pause seen recently. Home appliance sales show weakness. 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.
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) (June survey) and the Business Outlook Survey (July-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 is in a weak tone. Construction of houses for rent has been 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 shows steady performance.
Public investment shows steady performance. The amount of public construction completed in July increased by 1.7% from the previous month, the amount of contracted public works in August decreased by 10.8% from the previous month, and the amount of public works orders received in July increased by 5.6% from the previous month.
As for short-term prospects, public investment is expected to show steady performance 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 and the U.S. have been showing movements of picking up recently. Exports to the EU are picking up. Exports to other regions show movements of picking up. 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 showing movements of picking up 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 July increased, as import 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 decreased by 1.8% from the previous month in July. The Indices of Industrial Inventories increased by 0.6% from the previous month in July. The Survey of Production Forecast in Manufacturing expects an increase of 2.6% in August, and an increase of 2.4% in September.
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 picking up. 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 (June survey), in fiscal year 2023, sales are expected to increase by 2.4% in the first half of the year and are expected to increase by 1.3% in the second half from the previous year. Current profits are expected to decrease by 10.0% in the first half and decrease by 1.0% in the second half from the previous year.
Firms' judgments on current business conditions are picking up. The BOJ Tankan (June 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 September, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (August survey), current and prospective business conditions both fell.
The number of corporate bankruptcies appears to be increasing. The number of corporate bankruptcies was 758 in July and 760 in August. Total liabilities are 162.1 billion yen in July and 108.3 billion yen in August.
The employment situation shows movements of improvement.
The total unemployment rate was 2.7% in July, an increase of 0.2 percentage points from the previous month. The labor force and the number of unemployed persons increased, while the number of employed persons decreased.
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 (June survey), the DI for firms'judgment on current employment conditions was -32, the same level as the March 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), the ratio of households which forecast a rise in prices was 93.7% in August, an increase 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 32,200-yen level to the 33,500-yen level, the Nikkei Stock Average declined to the 32,400-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 146-yen level to the 145-yen level, moved in the direction of depreciation to the 148-yen level, and thereafter moved in the direction of appreciation to the 147-yen level.