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Monthly Report of Prospects for Japan's Economy
November 2012
Macro Economic Research Centre
Economics Department
The Japan Research Institute, Limited
http://www.jri.co.jp/english/periodical/
This report is the revised English version of the October 2012 issue of the original Japanese version.
The general situation of Japan’s economy – Economic activity has had a downswing
Figure 1-2 The Corporate Sector
Figure 1-1 Economic Activity
Figure 1-3 Overseas Demand
Economic activity has had a downswing, as shown in the
Industrial production declined to the lowest level since May 2011.
Exports to Europe and Asia have been sluggish.
decline in production and the stagnation in retail sales.
The inventory ratio in electronic parts and devices is at a high level.
Imports stay at a high level.
(CY2005=100)
(CY2005=100)
(CY2005=100)
110
100
140
150
Index of business
conditions (Composite
index, Coincident index)
105
140
130
95
90
85
90
70
80
07
100
100
75
06
110
110
80
65
2005
08
09
10
11
Real imports
90
Industrial production index
70
2005
12
06
07
08
09
10
11
12
(Y/M)
Source: The Cabinet Office.
(％)
6
10
Unemployment rate
(left scale)
8
6
4
(％)
4
2
3
0
▲2
2
Total cash earnings
(y/y % change,
right scale)
06
07
08
09
10
11
12
06
80
60
98
▲8
92
2005
(Y/M)
Source: The Ministry of Internal Affairs and Communications,
07
08
09
10
11
12
(Y/M)
Source: The Japan Research Institute, Ltd. based on the data
of The Cabinet Office, The Ministry of Internal Affairs
The Ministry of Health, Labour and Welfare.
* The shaded area indicates the phase of recession.
8
7
Condominiums sold
(Metropolitan area, right scale,
6-month moving average)
20
Real private consumption
expenditure index
06
(Y/M)
11
Housing starts
(1,00010
(annualised, left scale)
units)
9
40
94
12
12
100
100
▲6
11
Housing starts have been seesawing. Condominium sales
102
96
10
are on a weakening trend.
120
Real private consumption
integrated estimates
▲4
09
(10,000 houses)
140
(CY2005=100)
108
104
08
Figure 1-6 Housing Investment
Private consumption expenditure has weakened, reflecting
106
07
Source: The Bank of Japan.
the end of eco-car subsidies and the unseasonable weather.
Earnings increased for the first time in 4 months.
0
2005
70
2005
Figure 1-5 Private Consumption Expenditure
The employment situation has improved moderately.
1
(Y/M)
80
Source: The Ministry of Economy, Trade and Industry.
Figure 1-4 Employment and Income
5
120
120
Index of business
conditions (Composite
index, Leading index)
Real exports
130
Industrial inventory
ratio index
and Communications.
.
-1-
6
5
4
0
2005
3
06
07
08
09
10
11
12
(Y/M)
Source: The Ministry of Land, Infrastructure and
Transport, Real Estate Economic Institute Co., Ltd..
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
Economic activity has had a downswing, as production declines and exports stagnate
Japan's economic activity has had a downswing. The index of business conditions (composite index, CI) declined for four months running, both
in the coincident index and the leading index. Therefore, it is estimated that real GDP in the July-September quarter will have decreased over the
previous quarter. Production activity in enterprises has especially weakened. Industrial production in August decreased by 1.6 per cent over the
previous month, the second consecutive decline, which led the index to its lowest level since the rapid recovery from the sharp fall just after the
Great East Japan Earthquake and tsunami disaster in March 2011.
Based on production forecasts, it is estimated that industrial production will have declined significantly in September, mainly reflecting a double
digit fall in transport equipment due to the end of eco-car subsidies. It is very likely that the weakening in industrial production will continue for the
time being. Furthermore, if a deceleration in overseas economies intensifies, production activity could have a further downswing.
Overseas demand continues to be weak. Although real exports to the US increased for the first time in four months, no change has be seen in
the trend in exports to China, which has been flat, and the trend in exports to Europe, which continues to be on a declining path.
Figure 2-1 The Index of Business Conditions
Figure 2-2 Industrial Production Index
(Composite Index) and Real GDP
(CY2005＝100)
98
<seasonally adjusted>
(Trillion yen)
(CY2005=100)
520
96
94
515
92
100
Production index
(left scale)
<seasonally adjusted>
Change from the
previous month
(right scale)
6
95
(％)
3
Forecast index
(left scale)
85
88
500
2010
11
12
(Y/Q,M)
Real GDP (right scale)
実質ＧＤＰ（右目盛）
Index of business conditions (Composite index,
一致指数（左目盛）
Coincident index, left scale)
Index of business conditions (Composite index,
先行指数（左目盛）
Leading index, left scale)
1
120
100
80
75
▲1
▲3
▲4
12
60
▲2
70
2011
80
0
Others
その他
Electrical machinery
電気機械
Electronic devices
電子・デバイス
Basic materials
素材
Transport equipment
輸送機械
86
84
140
World
世界
China + HK <24>
中国+香港<24>
China + Asia excluding HK <31>
中国+香港除くアジア<31>
US <16>
米国<16>
EU <11>
EU<11>
2
510
505
(CY2007=100)
5
Forecast index
4
90
90
Figure 2-3 Real Exports by Region
12/7
(Y/M)
40
2007
08
09
10
11
12
(Y/M)
Source: The Japan Research Institute, Ltd. based on the data
of The Ministry of Finance, The Bank of Japan.
Source: The Ministry of Economy, Trade and Industry.
Note: Figures in the angle brackets show the shares in FY2011.
Monthly Report of Prospects for Japan's Economy November 2012
Source: The Cabinet Office.
The Japan Research Institute, Limited
-2-
While reconstruction demand continues, automobile sales declined due to the end of subsidies
The boosting effect on domestic demand of government measures for restoration and reconstruction from the disaster has been supporting the
economic recovery. The value of work in progress in public works continues to be on a rising trend since the start of this year. Also, public
investment on a GDP basis increased over the previous quarter for two quarters in a row.
On the other hand, private consumption expenditure has been weakening. Automobile sales in September declined considerably, reflecting the
end of subsidies for the purchase of eco-cars. Even if this automobile factor is excluded, private consumption expenditure has declined, due to
the negative effects of the unseasonable weather, the lingering summer heat, and so on.
The CPI excluding fresh food (the core CPI) declined by 0.3 per cent year-on-year in August, a fall for four months running. Viewed by item, the
prices of petroleum products declined, reflecting the fall in energy prices, as deflationary pressure arising from items such as household
appliances and furniture on the core CPI persists. The core CPI excluding food (but not alcoholic beverages) and energy (the core CPI, US type)
dropped by 0.5 per cent in August, continuing the trend of year-on-year decline.
Figure 3-1 The Value of Work in Progress
Figure 3-2 Real Consumption Expenditure Index
in Public Works and Public
2.5
<seasonally adjusted>
20
(CY2010＝100)
Public investment on a GDP
ＧＤＰ公共投資（年率、右目盛）
basis (annualised, right scale)
The value of work in progress
(Trillion yen)
公共工事出来高（年率、左目盛）
in public works (annualised,
24
left scale)
104
23
101
2.0
1.5
Real consumption expenditure
消費支出
Real consumption expenditure,
excluding expenditure on houses
除く住居、自動車購入費など
and automobiles
103
102
1.0
0.5
0.0
▲0.5
▲1.0
▲1.5
18
▲2.0
100
22
16
▲2.5
2008
99
21
14
20
12
98
97
96
10
2009
19
10
11
12
(Y/M,Q)
Source: The Japan Research Institute, Ltd. based on the
data of The Cabinet Office, The Ministry of Land,
<year-on-year % change>
(％)
Investment on a GDP Basis
(Trillion yen)
Figure 3-3 The Core CPI
<seasonally adjusted>
2008
09
10
11
12
(Y/Q)
Source: The Ministry of Internal Affairs and Communications.
Note: The figure in Q3 2012 is the average in July and August.
Infrastructure and Transport.
09
10
11
12
Food
食料
Fuel, lighting and
光熱・水道
water charges
Cigarettes
たばこ
Petroleum products
石油製品
Household appliances
家具・家電
and furniture
High school fees
高校授業料
Others
その他
Core CPI, US type
米国型コアＣＰＩ
(Y/Q)
Core CPI
コアＣＰＩ
Source: The Ministry of Internal Affairs and Communications.
Note: The core CPI: excluding fresh food, The core CPI, US type:
excluding food (but not alcoholic beverages) and energy.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-3-
Tankan Survey - Business conditions have worsened reflecting slowdown in overseas demand
In the Tankan September 2012 Survey, the diffusion index (DI) for business conditions (shown as "favourable" minus "unfavourable") in large
manufacturing was minus 3 percentage points, a 2 percentage point deterioration from the previous Survey. Viewed by industry, the DIs for
export-related industries such as steel and industrial machinery worsened, reflecting the deceleration in overseas economies. This trend is also
shown in the diffusion index for demand conditions for products in the overseas markets. Although the forecast DI for December was flat, it is
highly likely that the actual DI for December in the next Survey will worsen, taking into account the fact that, after the questionnaires in this Survey
had been collected by September 11, a wide range of large-scale anti-Japanese demonstrations took place in China. Thus, the negative
influences of the move will likely be felt in the next Survey results.
The DI for business conditions in large nonmanufacturing was unchanged at plus 8 percentage points. Viewed by industry, the DIs for
construction-related industries improved, in which restoration and reconstruction demand from the disaster has materialised in earnest. In
addition, the DIs for industries such as accommodations, and eating and drinking services rose. However, the forecast DI for December showed a
decline for the first time in three quarters, which implies anxiety about the sustainability of firm domestic demand.
Figure 4-1 Contributions to Business Conditions Diffusion Index by Industry
Figure 4-2 The Diffusion Index for Demand
Conditions for Products
<diffusion index of "favourable" minus "unfavourable", and percentage point contribution to the total DI points>
<large manufacturing>
(% points)
(% points)
10
Large Manufacturing
10
Forecast
5
Large Nonmanufacturing
(% points)
Forecast
10
0
5
▲10
0
0
▲5
▲5
▲20
▲30
▲10
▲10
▲15
▲15
Domestic
国内
海外
Overseas
worsen
▲40
▲50
▲60
2010
11
Basic
素材
materials
Motor
自動車
vehicles
12
(Y/Q)
Industrial
一般機械
machinery
Electrical
電気機械
machinery
Others
その他
Total
製造業
2007
2010
11
Construction建設関連
related
Information &
情報通信
communication
12
08
09
10
11
Consumption消費関連
related
Logistics物流関連
related
Others
その他
Total
非製造業
Source: The Japan Research Institute, Ltd. based on the data of The Bank of Japan, "The Tankan September 2012 Survey".
12
(Y/Q)
(Y/Q)
Source: The Bank of Japan, "The Tankan September 2012 Survey".
Note: The marker "○" shows the forecast for September in the
June Survey, and the marker "◇" shows the forecast for
December in this September Survey.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-4-
It would take time for Japan's exports to improve
As for the economic situation, the US economy will continue its moderate recovery trend. The Chinese economy will gain its economic
momentum again gradually mainly in domestic demand, supported by monetary easing and budgetary measures, although the deceleration in the
economy continues for the moment. On the other hand, in European economies as a whole, it is projected that the real GDP change rate will
continue in negative figures, due to austerity budgets, worsening employment and income environments, and so on. Because the share of exports
to the EU in Japan's total exports is smaller than that of exports to the US or China on a value basis, the direct negative effect of the deterioration
in European economies on Japan's economy would be limited. However, it should be noted that exports of China, those to the EU of which have a
large share in the total, have been decelerating sharply. Therefore, it is probable that Japan's exports to China, mainly in the producers' goods
sector, will continue to tend to have a downswing for the time being.
For reference, the composite PMI in manufacturing, the average PMI which is made of import- or purchasing-related PMIs in China, the US and
Europe, and is weighted by Japan's exports by destination, declined recently. Taking the situation into consideration, it cannot be hoped for that
Japan's exports would improve early.
Figure 5-1 China's CPI and Reserve
Figure 5-2 China's Exports by Destination
Requirements on Deposits
<seasonally adjusted>
(%)
(CY2008=100)
150
10
28
CPI (year-on-year %
change, left scale)
8
6
130
24
(%)
120
0
22
▲6
and Japan's Real Exports
<seasonally adjusted>
Composite PMI (US, China, Europe,
1 month advance, left scale)
60
(CY2005＝100)
140
55
120
110
50
100
▲2
▲4
(the US + China + Europe)
世界
<100>
World
<100>
EU
EU<20>
<20>
米国
<18>
US <18>
アジア
<23>
Asia <23>
140
26
4
2
Figure 5-3 Composite PMI in Manufacturing
20
Reserve requirements on deposits
(at the end of month, right scale)
▲8
▲10
▲12
2008
100
45
90
18
80
16
70
2008
09
10
10
11
12
Source: The National Bureau of Statistics of China,
The People's Bank of China.
(Y/M)
11
Japan's real exports
(total, right scale)
35
12
(Y/M)
14
09
80
40
Source: The Japan Research Institute, Ltd. based on the data
of General Administration of Customs of the People's
Republic of China.
Note: Figures in the angle brackets show the shares in CY2010.
30
2008
60
40
09
10
11
12
(Y/M)
Source: The Japan Research Institute, Ltd. based on the
data of Markit.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-5-
The negative effects of anti-Japanese mood in China on exports, corporate results, and tourism
A wide range of large-scale anti-Japanese demonstrations took place and became fierce in China, triggered by the nationalisation of the
Senkaku Islands by the Japanese government. If friction between Japan and China is prolonged, the following negative effects will be brought
about to Japan's economy.
1) A decline in exports to China and subsequent domestic production. The presence of China as a trading partner has been increasing. If
downward pressure on exports and production intensifies further, its negative effect could spread to a wide range of Japan's economic activity
through supply chains. 2) A downswing in corporate profits of Japanese enterprises due to worsened financial results of their local subsidiaries.
Current profits of local subsidiaries in China of Japanese enterprises amounted to about 1.7 trillion yen in FY2010, the largest among all countries
and areas. If the boycott of products of Japanese enterprises strengthens in China, it would be a downswing factor to financial results. However,
the negative effect would be limited, as 1.7 trillion yen is only 4.4 per cent of the total domestic current profits in Japan. 3) A fall in the number of
Chinese tourists to Japan. The number of Chinese tourists to Japan is the third largest after South Korean and Taiwanese. Moreover, the number
of overnight stays and their amount of expenditure by Chinese tourists is more than those of the tourists from any other country. The decrease in
Chinese tourists would have a negative impact on retailing and accommodations in Japan.
Figure 6-1 Breakdown of Japan's Exports
Figure 6-2 Current Profits and Employees of
to China <FY2011>
Electrical
machinery
4.0%
Transport
equipment
8.8%
Figure 6-3 Foreign Tourists to Japan
Local Subsidiaries of Japanese
by Country and Their Amount
Enterprises <FY2010>
Others
12.5%
(Trillion yen)
of Expenditure during Tours
(10,000 persons)
120
1.8
Producers' goods
(excluding electronic devices)
28.0%
Total exports
to China
15.9 trillion yen
Tourists to Japan
(10,000 persons)
700
100
600
1.6
80
500
1.4
60
(10,000 yen)
Others
その他
20
US
米国
HK
香港
China 15
中国
Taiwan
台湾
韓国
Korea
10
400
1.2
0
Source: The Ministry of Finance.
ASEAN4
US
EU
Japanese workers sent to each country or area
日本側派遣者数（右目盛）
by headquarters of Japanese enterprises (right scale)
Local employees in each country or area (right scale)
現地雇用者数（右目盛）
Current profits generated in each country or area
経常利益（左目盛）
(left scale)
Source: The Ministry of Economy, Trade and Industry.
11
5
Korea Taiwan China HK US
0
China
13
7
20
200
Capital goods
(excluding transport equipment)
27.2%
15
5
300
0.8
17
9
40
1.0
Electronic
devices
19.6%
(The number of
overnight stays)
100
0
2010
2011 (CY)
The amount of expenditure
旅行中支出額（左目盛）
during tours (left scale)
The number of overnight stays
平均泊数（右目盛）
(right scale)
Source: Japan National Tourism Organization, Japan Tourism Agency.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-6-
An insufficiency of workers for public works in the stricken areas could be a bottleneck
Thus far, the government has budgeted a total of about 18.5 trillion yen related to restoration and reconstruction from the disaster, about 11.5
trillion yen of which is estimated to be counted as the amount which can boost the real GDP growth rate directly as "reconstruction demand".
Economic activity for restoration and reconstruction in the disaster hit areas has been materialising in earnest since the start of this year, due to
the effects of the related budgets. As the pace of increase in the value of contracts for public works, which is considered to be a leading indicator
for public investment, has been accelerating, it is expected that public investment on a GDP basis will continue to increase from the April-June
period onwards.
On the other hand, the pace of advance in reconstruction activity is, in part, slower than previously expected. For example, in building public
houses for disaster victims, it is for only less than 15 per cent of the total that necessary sites have been purchased. Also, an insufficiency of
workers for public works and a mismatch between jobs offered and jobs sought have been problems in the disaster stricken areas.
Figure 7-3 Ratio of Job Offers to
Figure 7-2 Ratio in Progress in Building
Public Works and Public
Public Houses for Disaster
Application by Occupation
Investment on a GDP Basis
Victims in Stricken 3 Prefectures
in Miyagi Prefecture
<annualised, seasonally adjusted>
3.0
14
200
12
2.0
22
21
10
100
6
4
50
2
20
19
9
2010
11
12
(Y/Q)
Source: The Japan Research Institute, Ltd. based on
0
0
Has
purchased
sites
Has
started to
design
Has
started to
build
Has
completed
Source: The Japan Research Institute, Ltd. based on the
the data of The Cabinet Office, East Japan
data of The Ministry of Land, Infrastructure and
Construction Surety Co., Ltd., and so on.
Transport.
1.5
1.0
0.5
0.0
Food manufacturing
in Ishinomaki
150
in Sendai
10
8
11
2.5
Engineering work
23
(Ratio)
3.5
Construction
12
(％)
16
Before the disaster (Apr.2010 - Feb.2011)
震災前（2010年４月～11年２月）
After the disaster (Apr.2011 - Sep.2011)
震災後（2011年４月～11年９月）
After the disaster (Feb.2012 - Aug.2012)
震災後（2012年３月～８月）
Building, Civil
engineering
(Trillion yen)
Nominal public investment
公共工事請負金額
(on a GDP basis, right scale)
(Trillion yen)
The value of contracts for
ＧＤＰ名目公共投資（右目盛）
public works (1Q advance,
left scale)
24
Fukushima Prefecture (right scale)
福島県（右目盛）
Iwate Prefecture (left scale)
(Houses)
岩手県（左目盛）
Miyagi Prefecture (left scale)
宮城県（左目盛）
250
in Kesennuma
Figure 7-1 The Value of Contracts for
Source: The Japan Research Institute, Ltd. based on the
data of Miyagi Prefecture.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-7-
Private consumption expenditure is expected to weaken in Q3 and Q4 this year
Private consumption expenditure seems to have been weakening, due to the negative effects of the unseasonable weather and the lingering
summer heat, as the improvement in consumer sentiment has taken a breather. Also, subsidies for the purchase of eco-cars, which had
supported private consumption expenditure, came to an end on September 21. The reactionary decline in automobile sales has already started to
be seen since then, and it is likely that the trend will continue for the time being. Further, the diffusion index (DI) for future economic conditions of
household activity-related industries such as retailing and services dropped for four months running. Therefore, it is probable that the reactionary
decline in automobile sales and stagnant consumer sentiment will weigh on private consumption expenditure. As a result, it is projected that
private consumption expenditure will weaken both in the July-September quarter and the October-December quarter this year.
However, it is unlikely that private consumption expenditure will falter considerably triggered by the end of the subsidy programme, as shown in
the supporting trend that solid consumption activity continues to be seen in the households of which members are 60 years old or more, with their
propensity to consume rising.
Figure 8-1 Estimate on Automobile Sales
Figure 8-2 The Diffusion Index for Future
<annualised, seasonally adjusted>
<compared with CY2000>
activity-related Industries
The upswing due to tax cuts
and subsidies for eco-cars
the Age of the Heads of Households
Economic Conditions of Household(% points)
(Million cars)
5
Figure 8-3 Changes in Propensity to Consume by
55
12
10
50
8
4
3
The decline after
the Lehman shock
The decline after
the quake disaster
2
Estimate
for the
second half
of FY2012
45
6
40
4
2
35
0
Retail-related
小売関連
Services-related
サービス関連
30
▲4
25
2001
1
2008
09
10
11
12
13
(Y/Q)
Inc., Japan Automobile Dealers Association, Japan
03
05
07
09
11
(CY)
20
2010
11
12
Source: The Japan Research Institute, Ltd. based on the data
of The Japan Automobile Manufacturers Association
▲2
(Y/M)
Source: The Cabinet Office, "The Economy Watchers Survey".
All ages
全世代
30 - 39
30歳代
50歳代
50 - 59
29 and under
29歳以下
40 - 49
40歳代
60歳以上
60 and over
Source: The Japan Research Institute, Ltd. based on the data
of The Ministry of Internal Affairs and Communications.
Mini Vehicles Association, and so on.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-8-
Rushed demand expected in FY2013 before the rise in the consumption tax rate
The economic activity in the second half of FY2013 to March 2014 will have a considerable upswing due to rushed demand, if the consumption
tax rate is raised from 5 per cent to 8 per cent in April 2014. In the past, private consumption expenditure and housing starts increased
significantly in FY1996, when the consumption tax rate was raised last time in FY1997. Recently, the situation can be seen where the expected
rise in the consumption tax rate is taken cognizance of in considering the purchase of a house.
On the other hand, the economic activity in FY2014, when the rate is raised, will suffer a reactionary decline. Further, the rise in prices after the
consumption tax rise will lower the growth rate of private consumption expenditure in real terms through a reduction in the purchasing power of
households. Accordingly, the real GDP growth rate in FY2014 is estimated to be lower by 0.9 percentage points, based on the JRI macro model
simulation.
Figure 9-1 Rushed Demand and Reactionary
Figure 9-2 Private Consumption Expenditure
Fall due to Consumption Tax Rise
Before and After Consumption Tax Rise
Figure 9-3 Estimate of the Effect of
Consumption Tax Rise in
FY 2014 on Demand in FY2014
Others
その他
Durable goods
耐久財
(％)
2
Domestic final consumption
expenditure of households
(left scale)
18
15
1
(FY1996=100)
(% points)
(CY2005=100)
103
107.5
102
107.0
12
0
9
▲1
6
(％)
101
106.5
▲2
3
100
106.0
▲3
0
99
105.5
▲6
98
105.0
▲5
▲9
97
104.5
▲6
▲12
96
104.0
▲4
<5% → 8% in April 2014>
Private consumption expenditure deflator (right scale)
個人消費デフレーター（右目盛）
Nominal private consumption expenditure (left scale)
名目個人消費（左目盛）
Real private consumption expenditure (left scale)
実質個人消費（左目盛）
▲3
Housing starts
(right scale)
1996
97
98
The rise in the
consumption
tax rate
3% → 5%
(Y/Q)
1996
97
98
The rise in the
consumption
tax rate
3% → 5%
- 0.9
Real GDP
Real private consumption
expenditure
- 1.5
Housing starts
- 2.0
CPI
+ 2.2
(Y/Q)
Source: Macro model simulation by The Japan Research Institute,
Ltd. based on the data of The Cabinet Office.
.
Source: The Cabinet Office, The Ministry of Land,
Infrastructure and Transport.
Source: The Cabinet Office.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
-9-
Environments surrounding enterprises continue to be harsh
As industrial production declines, downward pressure on corporate profits has intensified, and, accordingly, business sentiment has worsened.
Machinery orders are also on a decreasing trend, which implies a cautious attitude towards business fixed investment in Japanese enterprises.
As for continued severe environments surrounding corporate profits, it can be pointed out that the continued strong yen as well as a slowdown
in overseas economies are considered their backgrounds. The recent exchange rates of the yen against the US dollar and the euro tend to be
rising, reflecting continued anxiety over the European debt crisis, possible effects of the additional monetary easing in the US, and so on.
It is considered that the continued strong yen would reduce corporate profits in total ultimately through a subsequent decrease in export quantity
and negative ripple effects between industries, although some industries do have exchange-margin profits due to the price effect. Based on the
JRI macro model simulation, if the exchange rates of the yen are 70 yen / US dollar and 90 yen / euro, it is calculated that corporate profits of
Japanese non-financial enterprises would decline by 5.1 percentage points in the first year and by 7.4 percentage points in the second year.
Figure 10-1 Sales Proceeds in Manufacturing
Figure 10-2 The Economy Watchers Survey
and Industrial Production Index
Figure 10-3 Estimate of the Effect of the
Result and Machinery Orders
Strong Yen on Corporate Profits
<year-on-year % change>
Industrial production index (left scale)
鉱工業生産指数（左目盛）
Industrial production forecast index (left scale)
鉱工業生産予測指数（左目盛）
(%)
40
20
0
▲20
▲40
▲60
Sales proceeds in manufacturing
(right scale)
▲80
▲100
2008
09
10
11
12
80
70
60
50
(%)
40
30
20
10
0
▲10
▲20
▲30
▲40
(Y/M,Q)
(% points)
The Diffusion Index (DI) for future economic
conditions (1 month advance, left scale)
55
50
9.8
45
9.6
(Trillion 9.4
yen)
40
9.2
35
9.0
30
8.8
25
Yen / US dollar
95 yen
90 yen
85 yen
75 yen
- 2.5 - 3.6 - 2.8 - 3.9 - 3.0 - 4.2
70 yen
- 4.9 - 7.1 - 5.1 - 7.4 - 5.4 - 7.7
65 yen
- 7.5 - 11.0 - 7.8 - 11.3 - 8.1 - 11.6
8.6
Machinery orders (private, excluding
shipbuilding and electric power, annualised
3-month moving averages, right scale)
20
15
10
2011
12
8.4
Source: Macro model simulation by The Japan Research Institute, Ltd.
8.2
based on the data of The Ministry of Finance, The Cabinet Office.
8.0
.Note: 1. The figure in the left side indicates the effect in the first year, and
(Y/M)
the figure in the right side the second year.
2. The effects are calculated as the differences from the figures in
the base line scenario of 80 yen / US dollar, and 104 yen / euro.
Source: The Japan Research Institute, Ltd. based on the
data of The Ministry of Finance.
10.0
Yen / Euro
Source: The Cabinet Office.
3. Corporate profits are for nonfinancials.
Note: The marks "○" indicate the production forecasts
for September and October 2011.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
- 10 -
Prospects for Japan's economy - Projected real GDP change; 1.7% in FY2012 and 1.4% in FY2013
(1) Japan's economic activity has had a downswing. Industrial production has declined, reflecting an intensified deceleration in overseas
economies. A cautious attitude towards business fixed investment of Japanese enterprises is continuing. Also, private consumption expenditure
has weakened, due to the negative effects of the unseasonable weather.
(2) As a result, it is estimated that the annualised quarter-on-quarter change rate of real GDP will have been negative in this July-September
period, with private consumption expenditure and business fixed investment declining. Further, it is projected that the change rate of real GDP will
be near zero in the October-December quarter, reflecting a reactionary decline in automobile sales due to the end of the subsidies for the
purchase of eco-cars, although the downswings in business fixed investment and exports will likely be checked.
(3) However, looking ahead further, it is projected that real GDP will grow at around 1.3 per cent on an annualised quarter-on-quarter change rate
basis from the January-March quarter to the July-September quarter in 2013, because private consumption expenditure will recover to a firm pace,
with the negative effect of the reactionary decline in automobile sales nearing the end, and exports are also expected to pick up.
In addition, in the second half of FY2013 to March 2014, it is projected that a rushed increase in demand for housing and durable consumer
goods will boost the quarterly real GDP growth rate considerably, before a rise in the consumption tax rate from 5 to 8 per cent which is expected
in April 2014.
(4) As for the Consumer Price Index excluding fresh food (the core CPI), the deflationary pressure will persist, as shown in the declining trend in
prices of household appliances and furniture, although a rise in electric power rates is expected to push up the index.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
- 11 -
Figure 12 Projections for GDP Growth and Main Indicators of Japan ( as of October 2, 2012 )
(seasonally adjusted, annualised % changes from the previous quarter)
CY2012
1～3
4～6
CY2013
7～9
(Actual)
10～12
1～3
(Projection)
4～6
CY2014
7～9
10～12
(Projection)
1～3
(Projection)
FY2011 FY2012 FY2013
(Actual)
(Projection)
5.3
0.7
▲ 0.3
0.2
1.3
1.2
1.4
2.9
4.4
▲ 0.0
1.7
1.4
5.0
0.5
▲ 0.5
▲ 0.6
0.6
0.7
0.9
3.2
6.8
1.2
1.5
1.1
Housing Investment
▲ 6.3
3.8
8.3
1.6
3.2
6.5
15.3
11.5
▲ 8.3
3.8
2.9
6.6
Business Fixed Investment
▲ 6.3
5.6
▲ 0.4
1.0
3.0
3.1
3.3
3.4
4.2
1.1
3.1
2.8
0.1) (
0.1) (
0.1) (
0.1) (
0.0) (
0.0) (
0.0)
(▲ 0.1) (
0.0)
Real ＧＤＰ
Private Consumption Expenditure
Private Inventories (percentage points contribution) (
1.2)
(▲ 0.6) (
Government Consumption Expenditure
4.4
0.6
0.8
0.8
0.5
0.3
0.2
0.5
0.7
1.9
1.5
0.4
15.2
7.2
4.5
2.1
▲ 0.5
▲ 4.7
▲ 7.9
▲ 2.4
▲ 1.0
2.9
5.0
▲ 2.9
Public Investment
Net Exports (percentage points contribution)
(　0.6)
(▲ 0.3)
(▲ 0.7)
(▲ 0.1) (　0.1) (　0.2) (　0.2) (　0.1)
Exports of Goods and Services
14.3
5.0
▲ 3.5
2.2
3.9
4.3
Imports of Goods and Services
9.1
6.7
1.0
2.8
2.7
2.8
(▲ 0.1)
(▲ 0.5)
(▲ 1.0)
(▲ 0.4) (
0.0)
4.5
4.8
4.8
▲ 1.4
3.6
3.6
2.9
3.8
5.1
5.6
5.4
3.0
(% changes from the same quarter of the previous year)
Real ＧＤＰ
Nominal ＧＤＰ
GDP deflator
Consumer Price Index (excluding fresh food)
Industrial Production Index
Unemployment Rate
Current Account Balances
Share of Nominal GDP
Exchange Rates
Import Price of Crude Oil
(％)
(trillion JY)
(％)
(JY/US$)
(US$/barrel)
2.9
1.5
▲ 1.3
0.1
4.8
3.2
2.2
▲ 0.9
▲ 0.1
5.3
1.6
0.8
▲ 0.8
▲ 0.3
▲ 3.2
1.4
0.7
▲ 0.7
0.0
▲ 5.3
0.6
▲ 0.1
▲ 0.8
▲ 0.1
▲ 4.0
0.7
0.2
▲ 0.5
▲ 0.1
▲ 1.3
1.0
0.6
▲ 0.4
0.0
3.0
1.6
1.5
▲ 0.0
0.0
4.9
2.4
2.6
0.1
0.1
6.4
▲ 0.0
▲ 2.0
▲ 1.9
0.0
▲ 1.0
1.7
0.9
▲ 0.8
▲ 0.1
▲ 2.0
1.4
1.2
▲ 0.2
0.0
3.2
4.6
2.05
1.8
79
116
4.4
0.98
0.8
80
123
4.2
1.43
1.2
79
106
4.2
0.05
0.0
78
113
4.1
1.55
1.3
79
115
4.1
0.93
0.8
80
115
4.1
1.91
1.6
81
115
4.0
1.02
0.8
82
115
4.0
2.62
2.2
83
115
4.5
7.62
1.6
79
114
4.3
4.01
0.8
79
114
4.1
6.48
1.4
82
115
Source: The Cabinet Office; The Ministry of Internal Affairs and Communications; The Ministry of Economy, Trade and Industry; The Ministry of Finance.
The projection figures are based on those of The Japan Research Institute, Ltd.
Note 1: "▲" indicates minus.
2: It is assumed that the consumption tax rate will be raised from 5% to 8% in April 2014.
3: The assumptions on the real GDP growth rates in CY2012 in major overseas economies: the US 2.2%, the euro area ▲ 0.6%, China 7.7%.
Monthly Report of Prospects for Japan's Economy November 2012
The Japan Research Institute, Limited
- 12 -