Monthly Economic ReportExecutive Summary( nov 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 recently.
- Corporate profits are improving as a whole.
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 compiled comprehensive economic measures for “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), which consists of three pillars. The first pillar is “Growth of Japanese and Regional Economies” for increasing current and future wages and incomes for all generations. The second pillar is “Overcoming High Prices” for paving the way for a transition to a growth-oriented economy in which no one is left behind. The third pillar is “Ensuring the Safety and Security of the People” for laying the foundation for the transition to a growth-oriented economy. The Government will strive for the early approval of the FY2024 supplementary budget, which backs up the comprehensive economic measures and will promptly implement related measures once the budget is approved by the Diet.
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
Real GDP (gross domestic product) in the July-September quarter of 2024 increased by 0.2% on a quarterly basis (at an annual rate of 0.9%), posting positive growth for the second consecutive quarter. Nominal GDP increased by 0.5% on a quarterly basis, posting positive growth for the second consecutive quarter.
Private consumption shows movements of picking up, although it remains pausing in part.
According to Quarterly Estimates of GDP for July-September 2024 (First Preliminary Estimates), the real term of private consumption increased by 0.9% from the previous quarter. According to Consumption Trend Index (CTI), the real term of Total Consumption Trend Index (CTI macro) increased by 0.1% from the previous month in September.
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 0.3% from the previous month in September. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value decreased by 2.2% from the previous month in September.
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 are picking up. Home appliance sales have appeared to be pausing for picking up recently. Travel is almost flat. 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 (April-June survey, including software investment) show that business investment increased in the April-June quarter of 2024 by 1.2% from the previous quarter. By industry, business investment decreased for manufacturers by 3.2% from the previous quarter and increased for non-manufacturers by 3.5%.
Capital Goods Shipments and Imports (excluding transport equipment), which comprise supply-side statistics on investment in machinery and equipment, have been flat recently. 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 2024 is expected to increase. According to the BOJ Tankan (September survey), DI for firms’ judgment on production capacity was +3 for manufacturers, showing that the sense of excessive capacity increased by 1 point from the June survey (+2), 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 June survey (-1). The figures for Orders Received for Machinery, a leading indicator, appear to be pausing for picking up. The planned amount of construction has been on a moderate upward trend recently.
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 September decreased by 0.7% from the previous month, the amount of contracted public works in October decreased by 5.7% from the previous month, and the amount of public works orders received in September increased by 3.8% from the previous month.
As for short-term prospects, public investment, partly due to the effect of related budgets, 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., and other regions are almost flat. Exports to the EU have been showing movements of picking up recently. 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 September increased, as import values increased while export values decreased. The balance of services is in deficit.
2. Corporate activities and employment
Industrial production is flat recently.
Industrial production is flat recently. The Indices of Industrial Production increased by 1.6% from the previous month in September. The Indices of Industrial Inventories increased by 0.1% from the previous month in September. The Survey of Production Forecast in Manufacturing expects an increase of 8.3% in October and a decrease of 3.7% in November.
By industry, transport equipment is flat. Production machinery is flat recently. Electronic parts and devices are picking up.
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. The number of corporate bankruptcies is increasing at a slower pace.
Corporate profits are improving as a whole. During the July-September quarter of 2024, the current profits of the listed companies decreased from the previous year for manufacturers and increased for non-manufacturers. According to the BOJ Tankan (September survey), in fiscal year 2024, sales are expected to increase by 2.6% in the first half of the year and are expected to increase by 2.1% in the second half from the previous year. Current profits are expected to decrease by 7.4% in the first half and decrease by 3.9% in the second half from the previous year.
Firms' judgments on current business conditions are improving. 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 rose, while prospective business conditions fell.
The number of corporate bankruptcies is increasing at a slower pace. The number of corporate bankruptcies was 807 in September and 909 in October. Total liabilities were 132.7 billion yen in September and 252.9 billion yen in October.
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 2.4% in September, a decrease of 0.1 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons all decreased. The employment rate shows movements of improvement.
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 on a moderate upward trend.
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 (September survey), DI for firms’ judgment on current employment conditions, which shows firms’ sense of a labor shortage, was -36 for all industries in September, showing that the sense of a labor shortage increased by 1 point from the June survey (-35). The DI was -22 for manufacturers, showing that the sense of a labor shortage increased by 1 point from the June survey (-21), and the DI was -45 for non-manufacturers, showing that the sense of a labor shortage was at the same level as the June 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, 11.5% expected a rise of less than 2% (12.8% in the previous month), 33.8% expected a rise of 2 to 5% (33.7% in the previous month), and 47.9% expected a rise of 5% or more (46.6% in the previous month) in October.
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 declined from the 39,200-yen level to the 38,200-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 153-yen level to the 156-yen level, moved in the direction of appreciation to the 154-yen level.