Monthly Economic ReportExecutive Summary( oct 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 recently, 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 moderately.
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 price increases, 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”.
The Government will promptly compliment Comprehensive Economic Measures which cosists from three pillars. First, “Overcoming high prices of commodities” which includes the immediate countermeasures for the People who are facing difficulty. Second, “Growth of Japan's Economy and Regional Economy” which includes the expanding of the regional revitalization measures update, enhancing the environment of wage increase of MSMEs, and promoting domestic investment that contributes to strengthening its potential. Third, “Ensuring Safety and Security of the People,” which includes response of the disasters.
Based on the “Package to Support the Lives and Livelihoods of the Affected People”, reserve funds will be utilized to provide continuous support for the victims of the 2024 Noto Peninsula Earthquake, including the rebuilding of their lives and livelihoods, as well as for the reconstruction of the areas affected by this earthquake. Addition to those measures, the Government will take all possible measures through implementing Comprehensive Economic Measures.
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 recently, although it remains pausing in part.
According to Quarterly Estimates of GDP for April-June 2024 (Second 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) decreased by 0.0% from the previous month in August.
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) increased by 0.1% from the previous month in August. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value increased by 1.0% from the previous month in August.
Looking at the background of consumption trends, real wage income of employees is showing movements of picking up. 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 recently, 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.
Housing construction is almost flat. Construction of owned houses has shown a steady undertone 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 in a weak tone.
As for short-term prospects, housing construction is expected to remain flat for the time being.
Public investment shows steady performance.
Public investment shows steady performance. The amount of public construction completed in August decreased by 1.1% from the previous month, the amount of contracted public works in September increased by 6.4% from the previous month, and the amount of public works orders received in August decreased by 12.3% 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 are almost flat. 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 are almost flat. By region, imports from Asia, 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 August decreased, as import values decreased to a larger extent than export values. 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 decreased by 3.3% from the previous month in August. The Indices of Industrial Inventories decreased by 0.8% from the previous month in August. The Survey of Production Forecast in Manufacturing expects an increase of 2.0% in September and an increase of 6.1% in October.
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 has been increasing at a slower pace recently.
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 2024 increased by 13.2% from the previous year and increased by 6.6% from the previous quarter. By industry, manufacturers saw an increase of 13.0% in corporate profits from the previous year, and non-manufacturers saw an increase of 13.3%. By size of company, large and medium-sized companies saw an increase of 14.6% from the previous year, and small companies saw an increase of 6.3%. 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 (September survey), current business conditions rose, while prospective business conditions fell.
The number of corporate bankruptcies has been increasing at a slower pace recently. The number of corporate bankruptcies was 723 in August and 807 in September. Total liabilities were 101.3 billion yen in August and 132.7 billion yen in September.
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 August, a decrease of 0.2 percentage points from the previous month. The labor force and the number of employed persons increased. The number of unemployed persons decreased. The employment rate has shown movements of improvement 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 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 showing movements of picking up. 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 at a slower tempo recently. Consumer prices have been rising moderately.
Producer prices have been rising at a slower tempo recently.
Consumer prices, in terms of general, excluding fresh food and energy, have been rising moderately.
Consumer prices, in terms of general, excluding fresh food (referred to as “core”) have been rising moderately.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 12.8% expected a rise of less than 2% (14.5% in the previous month), 33.7% expected a rise of 2 to 5% (34.9% in the previous month), and 46.6% expected a rise of 5% or more (42.7% in the previous month) in September.
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 37,100-yen level to the 37,900-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 143-yen level to the 152-yen level.