Recent Economic Developments March 28, 219 Cabinet Office Government of Japan Contact for inquiries: Directorate General for Economic Research +81-3-6257-1567
<Assessments of the current state of the Japanese economy> January The Japanese economy is recovering at a moderate pace. February The Japanese economy is recovering at a moderate pace. (Unchanged) March The Japanese economy is recovering at a moderate pace while weakness is seen recently in exports and industrial production in some sectors. (Changed) 1
<Assessments of the current state of the Japanese economy> January February March Private consumption Private consumption is picking up. Unchanged Unchanged Business investment Business investment is increasing. Unchanged Unchanged Exports Exports are in a weak tone recently. Unchanged Unchanged Industrial production Industrial production is increasing moderately. Industrial production is increasing moderately, while weakness can be seen in some areas. ( ) Industrial production is almost flat and weakness is seen in some sectors. ( ) Corporate profits Corporate profits are improving. Corporate profits improvement appears to be pausing, although they remain at a high level. ( ) Unchanged Firms judgments on business conditions Firms' judgments on current business conditions are almost flat. Unchanged Unchanged The employment situation The employment situation is improving steadily. Unchanged Unchanged Prices Consumer prices are flat recently. Unchanged Consumer prices are flat. Note: denotes downward revision. 2
<Short-term prospects> January The economy is expected to continue recovering, supported by the effects of the policies, while employment and income situation is improving. However, attention should be given to the effects of situations over trade issues on the world economy, the uncertainty in overseas economies including the prospect of the Chinese economy and the effects of fluctuations in the financial and capital markets. February The economy is expected to continue recovering, supported by the effects of the policies, while employment and income situation is improving. However, attention should be given to the effects of situations over trade issues on the world economy, the prospect of the Chinese economy, the uncertainty of situations and policies in overseas economies and the effects of fluctuations in the financial and capital markets. March Weakness remains for the time being in some areas, but the economy is expected to continue recovering, supported by the effects of the policies, while employment and income situation is improving. However, attention should be given to the effects of situations over trade issues on the world economy, the prospect of the Chinese economy, the uncertainty of situations and policies in overseas economies and the effects of fluctuations in the financial and capital markets. 3
(March) <Policy stance> The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscal consolidation simultaneously, in addition to make effort toward the reconstruction and revitalization from the Great East Japan Earthquake and the restoration and reconstruction from the 216 Kumamoto Earthquake. To this end, the Government steadily implements the "Basic Policies for Economic and Fiscal Management and Reform 218", the "Growth Strategy 218" and so on. Moreover, in order to establish the social security system oriented to all generations under which people of all generations can live at ease and work, the Government will promote comprehensive reform of the system including the labor system. Futhermore, looking ahead to the consumption tax rate hike planned for October 1, 219, the Government will take all possible measures towards economic and fiscal management. The Government will implement the FY218 first and second supplementary budget swiftly and steadily, and work for early passage of the FY219 budget including the temporal and special measures and the related bills. The Government continuously pursues to expand the economic virtuous cycles which cover local areas, SMEs and small-scale businesses, through directing growing corporate profits towards investment, wage increase and further improvement in the employment situation. The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity and prices. 4
GDP: Oct. Dec. 218 (Second Preliminary) Changes and contributions to changes in real GDP (seasonally adjusted) Nominal GDP 217 218 217 218 Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Oct. - Dec. Jan. - Mar. Apr. - Jun. Jul. - Sep. Oct. - Dec. Real GDP growth rate.4 -.1.5 -.6.5 1.9.8 [at annual rate] [1.6] [-.4] [1.9] [-2.4] [1.9] Domestic Demand (Contributions) (1.3) (.8) (.4) (-.2) (.6) (-.5) (.8) Private Demand (Contributions) (1.2) (.8) (.4) (-.2) (.6) (-.4) (.7) Private Consumption 1.1.4.5 -.2.6 -.2.4 Private Non-Resi. Investment 3.9 3.9.7 1. 2.5-2.6 2.7 Private Residential Investment 2.1-5.7-3.2-2. -2..6 1.1 Changes in Private Inventories (-.) (.2) (.1) (-.1) (-.1) (.1) (.) (Contributions) Public Demand (Contributions) (.1) (-.) (.) (-.) (-.) (-.1) (.1) Public Investment.7-3.2 -.1 -.7 -.7-2.3-1.7 Net Exports (Contributions) (.6) (.) (.) (.1) (-.1) (-.1) (-.3) Exports 6.8 3.1 2.2.4.4-1.4 1. Imports 3.4 3.3 2.3. 1.3 -.7 2.7 % 56 54 52 5 48 46 s.a., ann., tril. yen 548.9 tril. Yen (Record high) Nominal GDP growth rate 1.7.7.2 -.3.4 -.5.4 44 1994 2 5 1 15 18 Source: Cabinet Office. 5
Due to China s economic slowdown, exports are in a weak tone and weakness is seen in production of some sectors. Exports volume index for China compared with December 215, 3MA,% 3 25 Other IT-related goods 2 95 15 9 1 85 5 8 75-5 7 1 4 7 1 1 4 7 1 1 4 7 1 1 month 216 17 18 19 215=, s.a., 3MA Production by industry IIP (Jan. 219) MoM(3MA) -1.5% Production machinery (right scale) 215=, s.a., 3MA Forecast Transport equipment 95 Electronic parts and devices (right scale) 9 (right scale) 85 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 3month 214 15 16 17 18 19 125 12 115 Exports volume index Contribution to real GDP growth 125 12 115 215=, s.a., 3MA Total Asia EU 1 8 6 4 2 compared with 218 Oct. - Dec., % Real GDP growth Domestic demand Net exports 95 U.S. 9 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 2 214 15 16 17 18 19-2 month Ⅳ Ⅰ Ⅱ ⅢⅣ Ⅰ Ⅱ ⅢⅣ Ⅰ Ⅱ ⅢⅣ Ⅰ Ⅱ ⅢⅣ Ⅰ Ⅱ ⅢⅣ Ⅰ Ⅱ ⅢⅣ 212 13 14 15 16 17 18 quarter Sources: Ministry of Finance; Ministry of Economy, Trade and Industry; Cabinet office. 6
The Japanese economy is recovering at a moderate pace, as private consumption and business investment are on the rise. Private consumption and business investment Real wage income of employees 31 s.a., trillion yen s.a., trillion yen 211=, s.a. 35 Private consumption 95 3 9 95 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 month 295 85 215 16 17 18 19 Corporate profits 29 285 28 Business investment (right scale) ⅣⅠ ⅡⅢⅣⅠ ⅡⅢⅣⅠ ⅡⅢⅣⅠ ⅡⅢⅣⅠ ⅡⅢⅣⅠ ⅡⅢⅣ 212 13 14 15 16 17 18 8 75 7 quarter s.a., trillion yen 16 14 12 Non-manufacturing 1 Manufacturing 8 6 4 2-2 -4 2 5 1 15 18 Sources: Cabinet Office; Ministry of Finance. 7
-Private Consumption- 211= Synthetic consumption index (Real) Private consumption is picking up. Sales of home electric appliances are rising and outlays for eating-out are increasing moderately. 12 115 Home electric appliances 215=, s.a., 3MA Refrigerator 112 18 Eating-out 21=, s.a., 3MA 18 16 14 16 14 12 3MA (3 months moving average) 38 37 36 35 1 4 7 1 1 4 7 1 1 4 7 1 2month 216 17 18 19 New automobile sales volume 1, units, s.a., 3MA 34 99 33 98 1 4 711 4 711 4 711 4 711 4 711 4 711month 1 4 7 1 1 4 7 1 1 4 7 1 2month 213 14 15 16 17 18 19 216 17 18 19 16 14 13 12 11 Apparel sales 215=, s.a., 3MA 1 4 711 4 711 4 711month 216 17 18 19 Sources: Cabinet Office; Gfk Japan; Japan Food Service Association; Japan Auto Dealers Association; Japan Light Motor Vehicle and Motorcycle Association; Ministry of Economy, Trade and Industry. Notes: Automobiles include light motor vehicles. Apparel sales include fabric and accessory sales. 95 9 TV 12 1 4 7 1 1 4 7 1 1 4 7 1 2 216 17 18 19 month 8
5 4 3 2 1 The employment situation is improving steadily, and the number of employed persons has been increasing significantly..47 Increase in the number of employed persons from 212, million persons 15 to 64 years old (Male) 15 to 64 years old (Female) 65 years old and over Total.9 1.2 1.85 2.51 3.84 1.5 1 Increase in the number of employees by type of employment (From 212 to 218) 3.5 3 2.5 2 1.5 1.5 million persons 15 to 64 years old (Male) 15 to 64 years old (Famale) 65 years old and over Regular employee million persons 1.23 Non-regular employee 2 18 16 14 12 1 Rate of non-regular employees who could not obtain a job as a regular employee 19.2 12.8 213 14 15 16 17 18 year Increase in the number of employed persons by industry (From 212 to 218) %.5.4.34.32.28.27-1 213 14 15 16 17 18 year Medical, health Accommodations, care and welfare eating and drinking services Scientific research, professional and technical services Information and communications Wholesale and retail trade Manufacturing Source: Ministry of Internal Affairs and Communications. 9
-Business Investment- 13 125 12 115 1 213= Non-manufacturing Manufacturing Business investment Total 213 14 15 16 17 18 y/y, % Business investment plan Business investment is increasing. Investment in structures is expected to increase moderately. 66 64 62 6 58 56 54 52 5 9 Stance of profit allocation number of companies composition ratio, % Business investment Retained earnings Dividend 212 13 14 15 16 17 18 FY billion yen Investment in structures billion yen 14 8 +7.4% 8 Total 12 6 4 +5.% 7 6 Transportation (right scale) 8 6 2 FY217 (Feb. 218 survey) FY218 (Feb. 219 survey) 5 4 Accommodations, Eating & Drinking Services (right scale) 2 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 month 214 15 16 17 18 19 4 Sources: Ministry of Finance; Cabinet Office; Ministry of Land, Infrastructure, Transport and Tourism.. 1
References 11
Employment situation Prices 1.8 1.6 Umemployment rate and active job openings-to-applicants s.a., ratio s.a., % Active job opennings-to-applicants ratio [Highest level since 1974] 1.63 3.8 3.6 12. 11.5 11. CPI (Consumer Price Index) s.a., 215= Core CPI (less fresh food).5 1.4 1.2 Active job openings-to-applicants ratio (Regular employees) 1.14 3.4 3.2. 99.5 99. CPI Core-core CPI (less fresh food and energy) 1. 3. 98.5 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 12 214 15 16 17 18 19 month.8 2.8 2. CPI (excluding impact of a consumption tax increase) y/y, % chg..6.4 Umemployment rate (right scale) [Lowest level since 1993] 2.5 2.6 2.4 1.5 1..5 CPI.2 2.2.. 2. 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 month 214 15 16 17 18 19 Sources: Ministry of Internal Affairs and Communications; Ministry of Health, Labour and Welfare. -.5-1. Core CPI (less fresh food) Core-core CPI (less fresh food and energy) 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 1 4 7 1 12 214 15 16 17 18 19 Source: Ministry of Internal Affairs and Communications. month 12