Monthly Economic ReportExecutive Summary( mar 2025 )
(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 have been showing movements of picking up recently.
- Industrial production is flat.
- Corporate profits are improving.
Firms' judgments on current business conditions are improving. - The employment situation shows movements of improvement.
- Consumer prices have been 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, the effect of continued price increases on private consumption through a downturn in consumer sentiment and the impact of policy trends in the U.S. such as trade policy are downside risks to Japanese economy. Also, full attention should be given to the effects of 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, and will also work for early passage of the FY2025 budget and the related bills.
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 October-December 2024 (Second Preliminary Estimates), the real term of private consumption increased by 0.0% 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 January.
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 1.9% from the previous month in January. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value increased by 0.5% from the previous month in January.
Looking at the background of consumption trends, real wage income of employees is picking up moderately. Consumer sentiment is almost flat.
Moreover, based on the interview results, new automobile sales are picking up. Home appliance sales have been showing movements of 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 sentiment.
Business investment shows movements of picking up.
Business investment shows movements of picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey, including software investment) show that business investment increased in the October-December quarter of 2024 by 0.6% from the previous quarter. By industry, business investment increased for manufacturers by 0.7% 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 picking up. 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, show movements of picking up. The planned amount of construction is 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 is almost flat.
Housing construction is almost flat. Construction of owned houses has been flat recently. 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 December decreased by 0.8% from the previous month, the amount of contracted public works in February decreased by 9.3% from the previous month, and the amount of public works orders received in January decreased by 3.8% 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 have been showing movements of picking up recently. Imports are almost flat. The balance of goods and services is in deficit.
Exports have been showing movements of picking up recently. By region, exports to Asia have been showing movements of picking up recently. Exports to 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 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 balance of trade in January turned to deficit, as import values increased while export 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 decreased by 1.1% from the previous month in January. The Indices of Industrial Inventories increased by 0.9% from the previous month in January. The Survey of Production Forecast in Manufacturing expects an increase of 5.0% in February and a decrease of 2.0% in March.
By industry, transport equipment has been showing movements of picking up recently. Production machinery is flat. Electronic parts and devices are in a weak tone.
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. Firms' judgments on current business conditions are improving. The number of corporate bankruptcies is almost flat.
Corporate profits are improving. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2024 increased by 13.5% from the previous year and increased by 12.1% from the previous quarter. By industry, manufacturers saw an increase of 26.7% in corporate profits from the previous year, and non-manufacturers saw an increase of 6.4%. By size of company, large and medium-sized companies saw an increase of 8.4% from the previous year, and small companies saw an increase of 32.3%. 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 (February survey), current and prospective business conditions both fell.
The number of corporate bankruptcies is almost flat. The number of corporate bankruptcies was 840 in January and 764 in February. Total liabilities were 121.4 billion yen in January and 171.2 billion yen in February.
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 January, 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 is increasing moderately.
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.
Looking at the number of job offers at private employment agencies, it has been increasing at a slower pace recently for regular employment, while it is on a moderate downward trend for part-time employment (excluding “casual work”).
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 increased.
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. Consumer prices have been rising.
Producer prices have been rising moderately.
Consumer prices, in terms of general, excluding fresh food and energy, have been rising.
Consumer prices, in terms of general, excluding fresh food (referred to as “core”) have been rising.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 8.9% expected a rise of less than 2% (8.5% in the previous month), 30.5% expected a rise of 2 to 5% (32.5% in the previous month), 30.4% expected a rise of 5 to 10% (29.4% in the previous month), and 23.5% expected a rise of 10% or more (22.9% in the previous month) in February.
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 38,600-yen level to the 37,300-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of appreciation from the 151-yen level to the 148-yen level.