Monthly Economic ReportExecutive Summary( dec 2024 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace, although it remains pausing in part.
- Private consumption shows movements of picking up, although it remains pausing in part.
- Business investment shows movements of picking up.
- Exports are almost flat.
- Industrial production is flat.
- Corporate profits are improving as a whole, although the pace has become moderate.
Firms' judgments on current business conditions are improving. - The employment situation shows movements of improvement.
- Consumer prices have been rising recently.
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 continued high interest rate levels in the U.S. and Europe, and the lingering stagnation of the real estate market in China. Also, full attention should be given to the effects of price increases, future policy trends in the U.S., the situation in the Middle East and fluctuations in the financial and capital markets.
(Policy stance)
To ensure the overcoming deflation, the Government will make effort to implement a “Growth-Oriented Economy Driven by Wage Increases and Investments”, standing on the principle of “Economy is the foundation of public finance”.
To this end, the Government will promptly implement the “Comprehensive Economic Measures to Foster the Safety and Security of Citizens and Sustained Growth－Increasing Current and Future Wages and Incomes for All Generations－” (Nov 22nd, Cabinet decision) and the FY2024 supplementary budget. Moreover, the Government will compile the FY2025 budget in light of the “Basic Principles of FY2025 Budget Formulation” (December 6th, Cabinet decision) and the “Fiscal 2025 Economic Outlook and Basic Stance for Economic and Fiscal Management” (to be approved).
The Government and the Bank will continue to work closely together to conduct flexible policy management in response to economic and price developments.
The Government expects the Bank of Japan to achieve the price stability target of two percent in a sustainable and stable manner, while confirming the virtuous cycle between wages and prices, by conducting appropriate monetary policy management in light of economic activity, prices and financial conditions.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption shows movements of picking up, although it remains pausing in part.
According to Quarterly Estimates of GDP for July-September 2024 (Second Preliminary Estimates), the real term of private consumption increased by 0.7% 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 October.
As for each index, looking at Consumption Trend Index (CTI), which comprises demand-side statistics, the real value of Household Consumption Trend Index (CTI micro, total households) decreased by 1.0% from the previous month in October. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value decreased by 0.2% from the previous month in October.
Looking at the background of consumption trends, real wage income of employees is picking up moderately. Consumer confidence appears to be pausing for improving.
Moreover, based on the interview results, new automobile sales have been picking up, though with a pause seen recently. Home appliance sales have appeared to be pausing for picking up recently. Travel has been showing movements of picking up recently. Eating-out is increasing moderately.
Based on these results, private consumption shows movements of picking up, although it remains pausing in part.
Concerning short-term prospects, consumption is expected 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 shows movements of picking up.
Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey, including software investment) show that business investment increased in the July-September quarter of 2024 by 1.7% from the previous quarter. By industry, business investment increased for manufacturers by 4.2% from the previous quarter and increased for non-manufacturers by 0.5%.
Capital Goods Shipments and Imports (excluding transport equipment), which comprise supply-side statistics on investment in machinery and equipment, are almost flat. Software investment is increasing.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (December survey), planned business investment for all industries in fiscal year 2024 is expected to increase. According to the BOJ Tankan (December survey), DI for firms' judgment on production capacity was +2 for manufacturers, showing that the sense of excessive capacity decreased by 1 point from the September survey (+3), while the DI was -1 for all industries, including non-manufacturers, showing that the sense of insufficient capacity was at the same level as the September survey (-1). The figures for Orders Received for Machinery, a leading indicator, appear to be pausing for picking up. The planned amount of construction is on a moderate upward trend.
As for short-term prospects, business investment is expected to continue to be on a pickup trend, mainly reflecting steady corporate profits.
Housing construction is almost flat.
Housing construction is almost flat. Construction of owned houses has shown a steady undertone. Construction of houses for rent is flat. Construction of houses for sale is almost flat. 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 flat for the time being.
Public investment holds firm.
Public investment holds firm. The amount of public construction completed in October increased by 0.6% from the previous month, the amount of contracted public works in November increased by 13.1% from the previous month, and the amount of public works orders received in October decreased by 0.2% 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 almost flat. Imports have been showing movements of picking up recently. The balance of goods and services is in deficit.
Exports are almost flat. 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 pick up, as overseas economies continue to pick up. However, attention should be given to the downside risks of overseas economies.
Imports have been showing movements of picking up recently. By region, imports from Asia have been showing movements of picking up recently. Imports from the U.S. and the EU are almost flat. Concerning short-term prospects, imports are expected to pick up.
The balance of goods and services is in deficit.
The deficit in the balance of trade in October decreased, as export values increased while import values decreased. The balance of services is in deficit.
2. Corporate activities and employment
Industrial production is flat.
Industrial production is flat. The Indices of Industrial Production increased by 2.8% from the previous month in October. The Indices of Industrial Inventories remained flat from the previous month in October. The Survey of Production Forecast in Manufacturing expects a decrease of 2.2% in November and a decrease of 0.5% in December.
By industry, transport equipment and production machinery is flat. Electronic parts and devices are flat recently.
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, although the pace has become moderate. Firms' judgments on current business conditions are improving. The number of corporate bankruptcies is increasing at a slower pace.
Corporate profits are improving as a whole, although the pace has become moderate. According to the Quarterly Financial Statements Statistics of Corporations by Industry (July-September survey), corporate profits during the July-September quarter of 2024 decreased by 3.3% from the previous year and decreased by 10.6% from the previous quarter. By industry, manufacturers saw a decrease of 15.1% in corporate profits from the previous year, and non-manufacturers saw an increase of 4.6%. By size of company, large and medium-sized companies saw an increase of 2.1% from the previous year, and small companies saw a decrease of 22.1%. According to the BOJ Tankan (December survey), in fiscal year 2024, sales are expected to increase by 3.4% in the first half of the year and are expected to increase by 2.2% in the second half from the previous year. Current profits are expected to increase by 0.2% in the first half and decrease by 6.7% in the second half from the previous year.
Firms' judgments on current business conditions are improving. 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, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (November survey), current business conditions fell, while prospective business conditions rose.
The number of corporate bankruptcies is increasing at a slower pace. The number of corporate bankruptcies was 909 in October and 841 in November. Total liabilities were 252.9 billion yen in October and 160.2 billion yen in November.
The employment situation shows movements of improvement.
The employment situation shows movements of improvement. The sense of a labor shortage is at a high level.
The total unemployment rate was 2.5% in October, an increase of 0.1 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 has been increasing moderately recently.
Looking at Employment Referrals for General Workers, the number of new job offers at Public Employment Security Offices and the active job openings to applicants ratio are almost flat.
The employment situation at private employment agencies is improving moderately as a whole, although the improvement has been more gradual at some agencies recently.
As for the movement of wages, contractual cash earnings and the total cash earnings are increasing. Real wage income of employees is picking up moderately. Overtime hours worked in the manufacturing industry decreased.
According to the BOJ Tankan (December survey), DI for firms' judgment on current employment conditions, which shows firms' sense of a labor shortage, was -36 for all industries in December, showing that the sense of a labor shortage was at the same level as the September survey (-36). The DI was -23 for manufacturers, showing that the sense of a labor shortage increased by 1 point from the September survey (-22), and the DI was -46 for non-manufacturers, showing that the sense of a labor shortage increased by 1 point from the September survey (-45).
As for short-term prospects of the employment situation, it is expected to improve.
3. Prices and the financial market
Producer prices have been rising moderately recently. Consumer prices have been rising recently.
Producer prices have been rising moderately recently.
Consumer prices, in terms of general, excluding fresh food and energy, have been rising recently.
Consumer prices, in terms of general, excluding fresh food (referred to as “core”) have been rising recently.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 11.6% expected a rise of less than 2% (11.5% in the previous month), 34.1% expected a rise of 2 to 5% (33.8% in the previous month), and 47.5% expected a rise of 5% or more (47.9% in the previous month) in November.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise for the time being.
As for stock prices, the Nikkei Stock Average rose from the 38,100-yen level to the 39,000-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 152-yen level to the 149-yen level, moved in the direction of depreciation to the 153-yen level.