Development Bank of Japan
Research Report
No. 51

Recent Trends in the Japanese Economy:
Pause in Recovery

March 2005

Economic and Industrial Research Department
Development Bank of Japan

This report was originally published in Japanese as Chosa No. 77
in February 2005.

Contents
Summary ........................................................................................................................ iii
I

World Economy: Expansion Slows ....................................................................... 1 (Figures)
1. U.S. (1): Strong Personal Consumption and Business Investment Continued,
with Some Concerns over Future Downside Risk ............................................ 1 (15)
2. U.S. (2): Healthy Growth of Production and Employment,
Stable Share Prices and Interest Rates .............................................................. 1 (16)
3. U.S. (3): Current Account Deficit and Savings-Investment Balance................ 2 (17)4. U.S. (4): External Credits/Debts and Balance on Income................................. 2 (18)
5. European Economies (1): Mild Slowdown....................................................... 2 (19)
6. European Economies (2): Increased Presence of Euro ..................................... 3 (20)
7. Economies of Major Asian Countries (1): Rapid Growth Led by Exports,
Slight Slowdown in 2005.................................................................................. 3 (21)8. Economies of Major Asian Countries (2): Increased Dependency on
Exports to China ............................................................................................... 4 (22)
9. China (1): Mild Slowdown in Investment......................................................... 4 (23)
10. China (2): Trade Structure in Three Years following WTO Accession............. 5 (24)

II

Japanese Economy: Pause in Recovery ................................................................ 6
1. Overview: Showing Perseverance Supported by Brisk Corporate Sector ........ 6 (25)
2. Inventories Stay Low despite Adjustment in Some Producer Goods................ 7 (26)
3. Employment Situation Continues to Improve as Job Offers Increase .............. 7 (27)
4. Income Situation Stays Flat .............................................................................. 8 (28)
5. Respite in Savings Drawdown to Compensate for Reduced Income................ 8 (29)
6. Personal Consumption on the Rise but Slightly Slowing ................................. 9 (30)
7. Continued Increase in Business Investment Shows Signs of Slowdown........ 10 (31)
8. Residential Investment Stays Flat ................................................................... 10 (32)
9. Constant Decline in Public Investment due to Financial Squeeze ...................11 (33)
10. Exports Level Off, Current Account Surplus Shrinks......................................11 (34)
11. Exports – Characteristics of the Current Recovery Phase .............................. 12 (35)
12. Upward Pressure on Corporate and Consumer Prices to be
Checked as Crude Oil Prices Stabilize............................................................ 13 (36)
13. Easy Money Policy Continues ........................................................................ 14 (37)
14. Trends in Non-lending Finance....................................................................... 14 (38)Development Bank of Japan Research Report/ No. 51

iAnalysts and Writers:
Atsuhito Kurozumi
Masato Kanauchi
Keiichiro Oda
Takanori Wada
Yosuke Kagabayashi
Yoshiaki Hachiya
Hiroko Iwaki

Overall supervision
Sections II-1, II-2 and II-7
Sections I-5, I-6 II-13 and II-14
Sections I-9 and I-10
Sections I-1, I-2, I-3, I-4, II-10 and II-11
Sections II-3, II-4, II-5, II-6 and II-8
Sections I-7, I-8, II-9 and II-12This report is based on statistical data published by January 20, 2005.

ii

Development Bank of Japan Research Report/ No. 51

Recent Trends in the Japanese Economy:
Pause in Recovery
Summary
I.

World Economy: Expansion Slows
Expansion of the world’s major economies
has slowed as a whole; the U.S. economy continues to expand, while the growth is easing inEurope and Asia.
The U.S. economy continues to expand,buoyed by rising personal consumption as theemployment situation improves. However, thecontinued growth of outstanding household
liabilities is a cause for concern. Business investment is on the rise particularly in information
technology, but the growth of corporate profits isslowing mainly due to high crude oil prices, thus
raising concern about possible adverse impacts
on business investment. Production is growing
mildly. Regarding the current account balance,
the trade deficit continues to rise particularly
with China, and the total deficit for 2004 is expected to reach a record high. Although prices
are increasing partly due to rising crude oil prices,core prices remain stable. The federal funds rate
was raised five times in 2004, by a total of 1.25%.
Nonetheless, long-term interest rates and shareprices have held steady as cautiousness persists
about the future of the U.S. economy.
Major European economies (Germany,
France and the U.K.) are slowing down slightly.
In Germany, economic growth slowed as exports
fell after leading the recovery. The Frencheconomy recorded the first negative growth infive quarters due to a drop in personal consumption and business investment. In the U.K., economic growth slowed largely due to cutbacks inbusiness investment, although private consumption remains strong backed by the low unemployment rate. Consumer prices exceed the reference value for inflation, but the European Central Bank has not changed its official interest ratesince June 2003 reflecting concerns of economic
slowdown due to the higher euro. The euro is
now making its presence felt across international
markets: the value of euro-denominated straightbond issues in 2002 surpassed that of their dollar-denominated counterparts, and the lead widened in 2003.
Major Asian economies (Korea, Taiwan andSingapore) have started to slow following rapid
growth led by exports, and the downtrend in
production is raising concerns of possible inventory adjustment. Korea is experiencing a prolonged slump in consumption; the rapid appreciation of the won (against the dollar) may also
have an adverse impact on Korean exports.
China has become increasingly important as anexport market for the major Asian economies.
Although the growth of the major Asian economies is expected to slow slightly in 2005, theadjustment will be mild as the U.S. and Chinese
economies are expected to continue to expand,albeit more slowly.
The Chinese economy continues to growrapidly despite cooling measures. The current
growth of investment in fixed assets still exceeds
the level recorded in 2003. Consumption andexports are also increasing substantially. The
growth of money stock has been slowing, andprice inflation has paused. The total value ofChinese trade has doubled in the three years
since China’s accession to the WTO (November2001), thus substantially strengthening the presence of the country in world trade.
II. Japanese Economy: Pause in Recovery
The Japanese economic recovery appears to havepaused. The recovery phase, which started inearly 2002, strengthened particularly in late 2003
and early 2004, as exports and business investment increased on the back of the revitalized
world economy. Since mid-2004, however, therecovery has almost halted as exports leveled off
and production weakened largely due to theslower world economy and the inventory adjustment in electric parts & devices and relatedindustries. Looking ahead, production is unlikely
to suffer a major further fall, as the recent expansion in the world economy is expected to con-Development Bank of Japan Research Report/ No. 51

iii

tinue broadly, and inventory adjustment has so
far been limited to the above producer goods industries. Thus, the Japanese economy as a wholeis expected to show perseverance, led by the
corporate sector. Although incomes remain flatin general and employee compensation is considered to have bottomed-out, the growth of personal consumption has been slowing recently due
largely to the impact of unseasonable weather
and consumer confidence has wavered temporarily. Business investment has been increasing so
far in FY2004, supported by back-to-back substantial increases in corporate profits. However,business investment is expected to slow as machinery orders, the leading indicator, have
weakened slightly since late 2004 in manufacturing industries including electric machinery.
Nevertheless, a substantial drop is unlikely,
given the improvement in capacity utilization
and reduction in perceived overcapacity in general. Residential investment remains flat in general, with housing starts (seasonally adjusted annual rate) steady at just under 1.2 million units
since 2001. Public investment has been declining
continually since FY2001, reflecting the financial difficulties of both central and local governments. Exports are leveling off following asurge mainly to China that started in mid-2003 asiv

Development Bank of Japan Research Report/ No. 51

the overseas economies recovered. Imports arerising slightly. The current account surplus isshrinking, as the trade surplus starts to decline
due to flat exports and high crude oil prices
while the service account deficit continues towiden, particularly in travel.
Prices of corporate goods show signs ofleveling off as crude oil prices stabilize. Consumer prices are still weak.
On the financial side, the monetary baseremains high as the Bank of Japan maintains its
quantitative easing policy, but the money stock
continues to grow slowly. Outstanding privatebank loans have been on a downward trend, but
the shrinking pace has somewhat eased recently.
Attention is now focused on the possible impact
on deposits of the full lifting of the guarantee onbank deposits, scheduled in April 2005. So far,substantial movements, such as the massive shift
from time and savings deposits to demand deposits that occurred before the partial removal in
April 2003, have not been observed.
(As of January 20, 2005)
by the Economic Research Group(e-mail: report@dbj.go.jp)

I World Economy: Expansion
Slows
1. U.S. (1): Strong Personal Consumption
and Business Investment Continued, with
Some Concerns over Future Downside Risk(see p. 15 for figures)
The U.S. economy continues to expand. RealGDP in July-September 2004 (final estimate)grew 4.0% on the previous quarter (figure 1-1),
the twelfth consecutive quarter-on-quarter increase. Personal consumption recovered from a
temporary slowdown in the previous quarter,
while growth continued in business investment.
Meanwhile, residential investment is peaking at asolid level.
Consumer confidence is improving slightly
as the employment situation and incomes pick up,
contributing to the continued rise in personal
consumption (figure 1-2). Regarding disposable
income (figure 1-3), statistical data do not show
any positive effect of tax cuts; in fact, the tax
factor has had a negative effect. Steady consumption is partially sustained by the increase inhousehold liabilities including home mortgages
and consumer credits (figure 1-4). It has been
noted that the rise in housing prices, by raisingcollateral values, has resulted in increased borrowing through home equity loans,1 effectively
supporting consumption, but the rapid accumulation of household liabilities could become aconcern in the future.
The strong growth of corporate profits thatwas observed throughout 2003 has been slowing
since January-March 2004 largely due to rising
raw material prices (figure 1-5). Considering thathigher corporate profits have been boosting
business investment, their slowdown could havean adverse impact on such investment.
2. U.S. (2): Healthy Growth of Production
and Employment, Stable Share Prices andInterest Rates (see p. 16 for figures)
Industrial production has been rising gradually
since July-September 2003 and has regained thepeak of 2000 (figure 1-6). However, inventories
1

One type of home mortgage.

and shipments are both up over a year earlier, so
the inventory cycle seems to be at a mature stage.
By category of goods, equipment production has
been stronger than consumer goods production.
In parallel with the increase in production, capacity utilization in the manufacturing sector has
risen slightly, although the level remains low2.
The employment situation continues to improve. The number of employees has been increasing, led by services (figure 1-7). It rose by
2.23 million throughout 2004, providing a major
reason for the FRB to raise interest rates as described below. The rising employment has also
had a substantial impact on share prices. The
unemployment rate has declined gradually to the
mid-5% range.
As regards prices, the producer price index(PPI) and the consumer price index (CPI) bothrose faster over the previous year following the
hike in raw material prices including crude oil(figure 1-8). However, the ripple effect of expensive crude oil on overall prices has been limited
so far, as the core index – excluding energy andfood – remains relatively stable. Looking at the
PPI by stage of processing, the rise in crude material and intermediate goods prices has been
accelerating, but the increase has scarcely been
passed on to finished goods prices, so overall
prices have remained relatively stable.
In finance (figures 1-9 and 1-10), the Dow
Jones Industrial Average has risen gradually
thanks to brisk consumption and employment,
after fluctuating due to various factors such as
the state of the domestic economy including theemployment recovery, rising tensions in the
Middle East and the surge in crude oil prices. Inview of the rise in the number of employees, the
FRB raised the federal funds target rate fivetimes in 2004 (in June, August, September, November and December – by 0.25% each time) tocorrect its excessive monetary easing policy.
Thus, the target rate was raised by a total of
1.25%, to 2.25%, and many expect the rate toexceed 3% by the end of 2005. However,long-term interest rates (distribution rates of
10-year U.S. bonds) have already taken these2

The level of capacity utilization might not be accurate as
some consider that production capacity is overestimatedparticularly for information-related equipment, which would
bias the capacity utilization rate downward.

Development Bank of Japan Research Report/ No. 51

1

factors into account and are stable.
3.

U.S. (3): Current Account Deficit andSavings-Investment Balance(see p. 17 for figures)

The U.S. current account deficit has been growing as a percentage of GDP, averaging 5.5% inJanuary-September 2004. Thus, the deficit is expected to reach a record high for the year 2004
(figure 1-11). Looking more closely at the trade
deficit by partner, the deficit with Japan has
fallen sharply from the high level of the early
1990s. Instead, the deficit with China has
emerged as the major contributor to the total
trade deficit, exceeding that with Japan since2000 on a calendar year basis (figure 1-12). Thisis the primary reason why the U.S. is calling forthe revaluation of the renminbi (yuan). However,the current account balance in the medium tolong term is determined by the domestic savings-investment balance. In this sense, the expansion of the U.S. current deficit since 2001 has
been caused by the decline in household savings
due to active consumption and the widening
budget deficit due to the burgeoning cost of war
and tax cuts (figure 1-13). The current accountdeficit increased throughout this period despite
the decline in the effective exchange rate of thedollar. Therefore, any revaluation of the yuan
may have some impact on the U.S. trade deficit
with China, but the level of the current accountdeficit itself is unlikely to shrink much without
any change in the savings-investment balance indomestic sectors.
4.

U.S. (4): External Credits/Debts and Balance on Income (see p. 18 for figures)

The U.S. has been a so-called net debtor nation
since 1986,3 with external debts exceeding external credits. Whereas the amount of net debts
has since increased each year, the balance on
income has remained in the black (figure 1-14)
because the return on U.S. investment abroad has
exceeded the return on foreign investment in the
U.S. This section examines the balance on in3

This is the case when U.S. direct investment abroad isvalued at current cost. The country has been a net debtor
nation since 1989 if market value is used instead.

2

Development Bank of Japan Research Report/ No. 51

come and external credits/debts to identify thefactors behind this difference.
figure 1-15 shows the composition of thebalance on income. Apparently, profits from direct investment abroad affect the balance on income, as direct investment accounts for almost
half of income receipts. Interest payments fromthe government sector (on Treasury bonds, etc.)
account for a substantial share in the payment
column.
figure 1-16 shows the share of direct investment in external credits and debts. At the endof 2003 (the latest data available), direct investment accounted for almost 30% of external credits, but represented only 16% of external debts.
Yields on external debts, external credits,
direct investment abroad and foreign direct investment in the U.S. should be seen in this light.
In this section, yields refers to receipts or payments in the balance on income divided by theaverage of outstanding external credits or debts
for the period. figure 1-17 shows yields on external debts, external credits, direct investment
abroad and foreign direct investment in the U.S.
Since the country has an income account surplus
despite being a net debtor nation, yields on external credits exceed those on external debts.
And yet yields on U.S. direct investment abroad
far exceed those on foreign direct investment in
the U.S. A comparison of yields on direct investment by partner (figure 1-18) also indicatesthat yields on U.S. direct investment in partnercountries largely exceed those on incoming investment. Thus, it is the high profitability of
U.S.-based multinationals that helps maintain theincome account surplus.
5.

European Economies (1): Mild Slowdown(see p. 19 for figures)

The euro zone economies are experiencing aslight slowdown. The real GDP of the EU25
grew only 1.3% (annualized quarter-on-quarter
growth in July-September 2004, the same applies
to all GDP growth data in this section), the second consecutive quarter of slowdown in growth.
The increase in government outlays and inventories was largely offset by the decline in exports(figure 1-20).
Looking at the economies of major Euro-pean countries, France’s economy contracted
while Germany’s and the U.K.’s both experienced slower growth.
In Germany, personal consumption continues to slump as the unemployment rate stays
high. Although investment in inventories increased, exports fell abruptly after having led thewhole economy. On balance, real GDP growthdeclined to 0.4% (figure 1-19 (1)).
The French economy recorded the firstnegative growth in five quarters, as private consumption and fixed capital formation both fell
after having led the growth (figure 1-19 (2)).
In the U.K., personal consumption is still
strong thanks to the low unemployment rate, but
growth slowed largely due to the decline in fixed
capital formation (figure 1-19 (3)).
As regards the employment situation, theunemployment rate (according to the ILO standard) is still stable at over 4% in the U.K. and isleveling off in France at around 9.5%. In Germany, however, unemployment is still rising
gradually and is now almost 10% (figure 1-21).
Unit labor cost is declining in Germany as aresult of restructuring, effectively pushing up
corporate profits. Thus, German firms have beenable to increase investment in machinery andequipment in spite of the current economic slowdown (figure 1-22).
6. European Economies (2):
Increased Presence of Euro(see p. 20 for figures)
Following a steep appreciation at the beginningof 2004, the euro temporary stabilized against the
dollar, only to climb again towards the end of
2004. However, the rise in the effective exchange rate has been relatively mild (figure1-23).
Although the CPI in the euro zone has been
rising and has surpassed the reference value of
2%, the European Central Bank has been holding
the official interest rate at 2% since June 2003
due to fears of euro appreciation causing an
economic slowdown (figure 1-24).
One of the factors behind the euro appreciation may be its increased presence as an international currency. Indeed, the value of
euro-denominated straight bond issues in inter-national markets surpassed that of their dollar-denominated counterparts in 2002, and thegap increased in 2003 (figure 1-25). The share of
the euro in foreign currency reserves has also
risen, reaching almost 20% at the end of 2003
(figure 1-26).
Trade with other members accounts for ahigh percentage of total trade in the euro zone
economies. In Germany, a major exporting country, exports to the 12 euro zone countries represent 43.5% of total exports, far exceeding theshares of exports to the U.S. and Asia – botharound 10%. Hence, the direct impact of the euro
appreciation against the dollar may be limited(figure 1-27).
7. Economies of Major Asian Countries(Korea, Taiwan and Singapore) (1): Rapid
Growth Led by Exports,
Slight Slowdown in 2005
(see p. 21 for figures)
The rapid export-led growth of the major Asian
economies since the latter half of 2003 slowed in
July-September 2004. By component, exports
and fixed capital formation are boosting growthin Korea, Taiwan and Singapore. Consumption
also contributes positively except in Korea. Although inventories are another positive factor,
weakening production in IT-related industries
implies possible inventory adjustment in thequarters ahead (figures 1-28 and 1-29).
In general, economic growth in 2004 is expected to reach the level recorded in 2000 during
the IT bubble, other than in Korea, thanks tostrong growth in the first half of the year. Growthis expected to slow in 2005, as the Chinese andU.S. economies may weaken. However, any such
slowdown will represent only a mild adjustment(figure 1-32).
The growth of the Korean economy isslowing amid slumping consumption, as the
positive contribution of net exports shrank inJuly-September 2004. Moreover, the won has
been rising rapidly (against the dollar) since October-December 2004, and could adversely impact exports that have led the overall growth(figure 1-30). Fixed capital formation is remaining healthy, largely due to the exceptionally low
level of construction investment recorded in theDevelopment Bank of Japan Research Report/ No. 51

3

previous year, which was beset by typhoons. Although prices are tending to rise in general due to
expensive crude oil, core price inflation is remaining within the monetary policy target (figure1-31). In response to the prolonged slump in
consumption and the problem of household debts,
the Bank of Korea eased monetary policy further,lowering the overnight call rate by 0.25% in both
August and November.
Likewise, the Taiwanese economy slowed
down in July-September 2004. However, thisfollowed exceptional year-on-year growth inApril-June 2004, in reaction to the unusual dropin economic activity a year earlier due to the
SARS epidemic. The contribution of net exports
is currently limited, as imports are growing more
rapidly than exports. Although fixed capital formation has been contributing to economic
growth, possible weakening is expected as plant
construction plans are being revised in view of
reduced profits for LC panel manufacturers anddeteriorating market price conditions (figure1-28).
In Singapore, economic growth has beenslowing since July-September 2004, although thesame caveat mentioned for the Taiwanese
economy applies (unusually low growth and exceptionally rapid growth in April-June 2003 and2004, respectively). The growth rate stood at
5.4% in October-December (figure 1-28).
8.

Economies of Major Asian Countries (Korea, Taiwan and Singapore) (2): Increased
Dependency on Exports to China(see p. 22 for figures)This section examines the trends in exports,
which have led the growth of major Asian
economies since the latter half of 2003.
First, figure 1-33 indicates that in all three
countries, exports to other Asian countries andthe U.S. were booming in the first half of the
1990s, followed by a substantial increase of
China’s share, particularly since 2000. China isthus developing an increasing presence as a major export market.
Second, Taiwan’s direct investment abroadhas been rising as a whole in recent years. By
country, China’s overwhelming share indicatesthat Taiwanese firms are active in mainland

4

Development Bank of Japan Research Report/ No. 51

China. Factors behind this trend may include (1)cutbacks on labor cost and (2) development of
new markets. Taiwanese firms operating in
China are assumed to be procuring materials
from Taiwan for local production (figure 1-34).
Likewise, Korea’s dependency on exports to
China has been rising generally. However, major
export markets vary by products. Looking at thecountry’s major export goods (semiconductors,4
other electronic parts & devices,5 communication equipment and automobiles) by trading
partner since 2003, semiconductors and otherelectronic parts & devices are mostly exported to
the U.S., Japan and Taiwan, as well as to China,
while an overwhelming percentage of communication equipment and automobile exports goes tothe U.S. Thus, products at different stages ofprocessing (producer goods and finished goods)
may be exported to different countries (figure1-35).
9.

China (1): Mild Slowdown in Investment(see p. for 23 figures)

Real GDP grew 9.1% in July-September 2004.
Although this is slightly less than the 9.6% recorded in the previous quarter (April-June), thebooming economy will result in annual GDP
growth of about 9.2% for the year 2004. Active
investment and consumption are driving the continuing rapid growth. At the National Development and Reform Work Forum held on December 8, 2004, the National Development and Reform Commission announced that it would set
the GDP growth target at 8% for 2005, up 1 percentage point from the 2004 target. The Chinese
government has maintained a tight money policy
since the spring of 2004 to dispel concerns about
overheating of the economy. By raising the
growth target, however, the government officially recognized the faster-than-expected economic growth (figure 1-36).
The growth of fixed asset investment inJuly-September (26.8%) declined slightly fromthe previous quarter (31.0%), but still exceeded
the annual growth of 26.7% in 2003. Thus, thegrowth of fixed asset investment will likely be
4Chips, wafers, DRAMs, SRAMs, flash memories, CPUs,
etc.
5
Main boards, sound cards, etc.

higher in 2004 than in 2003 (figure 1-37). By
region, in July-September 2004 the share of central and western provinces (inland area) in total
fixed asset investment increased slightly. By industry, real estate and industries related to transport infrastructure continue to lead investment(figure 1-38).
Consumption in July-September increased
substantially on the previous year. Personal
spending boomed in housing and communicationequipment including cellular phones as living
standards rose. Service consumption related to
culture and education also remained strong. Although data indicate a quarter-on-quarter decline,
the substantial increase in the previous quarter
involved extraordinary factors such as the reaction to sluggish consumption due to SARS a year
earlier. Rather, a comparison with earlier data to
January-March 2004 indicates that consumptionis accelerating (figure 1-39).
As regards prices, the sharp rise in foodprices eased in July-September with the prospectof a good harvest in agriculture, largely dissipating concern about consumer price inflation. The
growth of money stock has been slowing as thetight money policy takes effect (figure 1-40).
Trade continued to expand smoothly in
July-September on the back of booming electricmachinery exports, and the trade balance stayedin the black for two straight quarters (figure1-41).
10.

China (2): Trade Structure in Three
Years following WTO Accession(see p. 24 for figures)

Three years have passed since China joined the
WTO in November 2001. China’s trade expanded rapidly throughout the three years, andthe value of total trade in 2004 (annualized) was
almost twice that recorded in 2001. China’s
shares of world exports and imports have bothexceeded 5%. Looking at the composition of
trading partners, the weights of the U.S. and EU
have increased in exports, while the shares of

Korea and Taiwan have risen significantly inimports (figure 1-42). A comparison of tradebalance between 2000 and 2004 by major trading
partner indicates a widening trade deficit with
Taiwan, Japan and Korea, as well as increasing
trade surplus with the U.S. and EU. In particular,
the trade surplus with the U.S. has been risingstrongly (figure 1-43).
The expansion of Chinese trade is largely
supported by foreign affiliates operating in the
country. Indeed, the structural dependency ofChinese trade on foreign affiliates has been rising. The share of foreign affiliates in Chinese
trade has increased since China’s accession to
the WTO, as their weight in Chinese exports roseto 54.8% in 2003 from less than 50% in 2000.
With the government actively favoring foreign
capital, direct investment in China has been rising steadily. Under these circumstances, thestructural dependency on foreign affiliates is expected to continue for some time (figure 1-44).
Looking at the share of foreign affiliates in industrial production, high foreign capital ratios
are observed in specific industries such as electronics and textiles. Only a few industries experienced substantial fluctuation in the foreign
capital ratio between 2000 (before accession) and2003 (after accession) (figure 1-45).
At the time of China’s accession to the
WTO, various scenarios regarding the impact on
the Chinese economy were discussed. Expected
outcomes included the expansion of trade volume through the reduction of trade barriers, increased foreign investment in the country due tomarket opening measures and, in some industries,
local businesses being swamped by foreign affiliates with advanced technologies and services.
The growth of Chinese trade and the expansionof foreign investment in China seem to be progressing as expected. However, the expectedstructural adjustment by foreign affiliates insome industries has not yet materialized, judging
from the share of foreign capital in each industry’s production.

Development Bank of Japan Research Report/ No. 51

5

II Japanese Economy: Pause in
Recovery1.

Overview: Showing Perseverance Supported by Brisk Corporate Sector(see p. 25 for figures)

The Japanese economy’s recovery appears tohave paused. This recovery phase, which started
in early 2002, strong particularly in late 2003 andearly 2004, as exports and business investment
increased on the back of the revitalized world
economy. Since mid-2004, however, it has almost halted as exports leveled off and production
weakened largely due to the slower world
economy and the inventory adjustment in electricparts & devices and related industries. According
to the quarterly estimates of GDP (second preliminary estimates) for July-September 2004,
real GDP (figure 2-1) in July-September fell
0.2% on a year earlier, following negative
growth of 0.6% in April-June. By component,
the year-on-year growth of exports declined
sharply to 2.5% in July-September 2004 largely
due to the slowdown in the world economy, after
four consecutive quarters of double-digit increase from July-September 2003. Domestic
private demand including business investment
and personal consumption continued to increase
but at a slower pace.
Looking at the current trend of each demand
item based on the quarterly GDP data for
July-September 2004 and monthly indicators
thereafter, the growth of consumption is slowing
largely due to unseasonable weather, although
the employment situation remains generally flatwith employee compensation bottoming out due
to the increase in the number of employees. Thus,
consumer confidence has temporarily stopped
improving. According to the Family Income andExpenditure Survey, the nominal living expenditure of all households increased on a year earlier for three consecutive quarters in 2004, butcurrently is declining slightly due to relatively
moderate temperatures and to natural disasters
including typhoons and earthquakes.
Business investment has been increasing so
far in FY2004, supported by back-to-back substantial increases in corporate profits. A slowdown in business investment is expected, how6

Development Bank of Japan Research Report/ No. 51

ever, as machinery orders, the leading indicator,
have weakened slightly since late 2004 in manufacturing industries including electric machinery.
Nevertheless, business investment is unlikely todrop sharply, given the high level of capacity
utilization and perceived under-capacity in general.
Residential investment remains flat in general, with housing starts (seasonally adjusted annual rate) remaining at just under 1.2 million
units since 2001. Land prices continue to decline
and greater demand for housing is observed in
expectation of rising interest rates. Thus, further
improvement in the employment and income
situations will keep up housing investment, despite some negative factors such as the phasingout of tax breaks for mortgage loans.
Public investment has been declining continually since FY2001, reflecting financial difficulties in both central and local governments.
Indeed, it accounted for less than 5% of GDP(nominal basis) in 2004, and further declines are
expected as structural reform and financial difficulties continue.
Exports are leveling off after surging since
mid-2003, mainly to China, on the back of economic recovery overseas. Imports are on a mild
uptrend. The current account surplus is shrinking
as the trade surplus starts to decline and the service account deficit continues to widen, particularly in travel.
Production (figure 2-2) is falling as adjustments proceed in electronic parts & devices andrelated industries amid flat exports. The tertiaryindustry activity index is rising slightly as consumption stays brisk. The construction activity
index continues to decline due to reductions inpublic works, although private construction isbottoming out.
Looking ahead, production is unlikely tosuffer a major further fall, as the recent expansion in the world economy is expected to continue broadly, and inventory adjustment has so
far been limited to the above producer goods industries. Thus, the Japanese economy as a wholeis expected to show perseverance, led by the
corporate sector.

2.

Inventories Stay Low despite Adjustment
in Some Producer Goods(see p. 26 for figures)

Looking at the inventory cycle of the overall industrial and mining sector (figure 2-3), inventories are currently below the previous year’s levelfor both producer goods and consumer goods asa whole, although some producer goods including electronic parts & devices have entered aninventory adjustment phase. Also, capital goods
are in a buildup phase as a whole, backed by increased business investment. Thus, pressure towards inventory adjustment is relatively small in
the whole industrial and mining sector.
Figure 2-4 shows the level of inventories inelectronic parts & devices. The inventory ratio
index is declining in parallel with reduced production, suggesting that inventory accumulationis peaking. Compared with a similar phase after
the burst of the IT bubble, the current phase of
inventory accumulation may be characterized asfollows.
(1) Although production adjustment started atsimilar levels of the inventory ratio index(100-110), the ratio leveled off earlier in thecurrent phase.
(2) The inventory ratio index peaked at a lower
level in the current phase.
Figure 2-5 projects the future movement of
production adjustment in electronic parts & devices based on the trend of shipment-inventory
balance (year-on-year growth of “shipment index” – year-on-year growth of “inventory index”). Production is expected to bottom out inthe latter half of 2005 after declining by about
20% on the previous year towards the middle ofthe year.
3.

Employment Situation Continues to Improve as Job Offers Increase(see p. 27 for figures)

The ratio of active job openings to applicants has
been rising since bottoming at 0.51 in January-March 2002 (figure 2-6), reaching 0.83 in
July-September 2004, the highest level since
January-March 1993 (0.88). The unemployment
rate has declined gradually since July-September
2003, with monthly fluctuations.

Despite the continued improvement in both
the ratio of active job openings to applicants andthe unemployment rate, overtime hours are perceived to be leveling off particularly in the
manufacturing sector (figure 2-7). This corresponds to the current downtrend in production.
The number of workers has increased sincehitting the bottom in April-June 2002. However,
the recovery has been slow and lacks dynamism(figure 2-8 (1)). By industrial sector,6 the number of workers has been decreasing in manufacturing and construction, and the increase has
been led by the service sector, particularly industries related to medical care and welfare.
By type of employment, the recovery has
become more clear as the number of regular employees has risen over the previous year after aprolonged decline, in addition to the structural
increase in temporary and daily employees 7(figure 2-8 (2)). The number of self-employed
and family workers is on a declining trend in thelong-term, but at a slower pace at the moment.
By size of corporation, the number of employees in large corporations (employing 500 or
more workers), which declined substantiallyfrom the second half of 2001, has been risingsince 2003, boosting the total number of employees (figure 2-8 (3)). The recovery is spreading to medium-sized corporations (employing
30-499 workers). Meanwhile, small-sized corporations (employing fewer than 30 workers) arestill shedding employees despite signs of improvement. On balance, the number of employees is rising only slowly.
The ongoing increase in the number of newjob openings (figure 2-9), which is a leading indicator of employment, suggests that the numberof employees will increase in the months ahead.
However, the number is unlikely to rise rapidly
for the moment, as the increase in new job openings has not shown a sign of acceleration. Employment is expected to increase gradually as
overtime hours seem to be leveling off.

6

Based on the new industrial classification (revised in
March 2002).
7
Temporary and daily employees refer to those hired for aperiod of one year or less, and regular employees refer to
executives and those hired for a period of over one year orfor an undetermined period.
Development Bank of Japan Research Report/ No. 51

7

4.

Income Situation Stays Flat(see p. 28 for figures)

The year-on-year change in total cash earnings
per person reveals continued sub-par performance despite some signs of recovery (figure 2-10).
Specifically, overtime pay continues to rise on
the previous year as overtime hours increase(figure 2-7). Bonuses and special earnings alsorose in July-September 2004.8 However, regularwages and salaries show no improvement, partly
due to the downward pressure from the rising
share of part-time workers in the workforce.9
Nominal compensation of employees, 10
which is useful for understanding the income
situation in terms of the whole economy, appears
to be bottoming out after falling since 2001 (figure 2-11). This is mainly because the number of
employees is recovering slightly, although per
capita wages continue to decline (figure 2-8 (3)).
Thus, the income situation overall remains unchanged, and so the negative impact of reduced
income on consumption has faded recently.
Figure 2-12 shows the evolution of labor’s
share11 as an indicator of future income situation.
The share has been declining since 2002 and is
now below the levels recorded during the twomost recent economic peaks.12 Although views
8

Bonuses still follows a downtrend as the 2004 summer
bonuses (June-August) declined 1.2% on the previous year.
9Part-time workers receive just over 20% of the wages
earned by full-time workers, in part due to the difference inhours worked. Therefore, any increase in the share ofpart-time workers in the workforce exerts downward pressure on wages per person.
10Compensation of employees refers to that part of value
added which is distributed to employees for the provision oflabor. This includes not only cash payments to employees
but also social insurance contributions by employers andallowances in kind such as meals and commuter passes. Asa rule of thumb, compensation of employees is approximately (per capita wages)×(number of employees).
11
Labor’s share refers to the ratio of consideration for labor
service (i.e. labor cost) to the total value added by production activities. For the purpose of this report, labor’s share isdefined according to the Financial Statements Statistics ofCorporations by Industry as personnel expenses÷(current
profits + personnel expenses + interest and discounting
expenses + depreciation expenses).
For discussion on the definition of labor’s share and calculating methods, see Wataru Miyanaga (2002), “Labor's
Share and the Adjustment of Wages and Employment,” DBJ
Research Report No. 27, for instance.
12
October-December 2000 and April-June 1997 (according
8

Development Bank of Japan Research Report/ No. 51

diverge on how far the decline will continue, it iscertain that firms have more funds for distribution to labor. Further improvement in corporate
profits is expected to have some spillover effecton income.
Against this backdrop, private final consumption according to the GDP estimate has
been growing since bottoming in April-June
2003, even on a nominal basis (figure 2-13).
Consumption based on the GDP estimate necessarily diverges upwards from consumption basedon the Family Income and Expenditure Survey
due to such factors as the larger population andthe inclusion of imputed rent, which is growing
steadily. Nonetheless, the data reveal active
consumption compared with employee compensation (figure 2-11).
5.

Respite in Savings Drawdown to Compensate for Reduced Income(see p. 29 for figures)

As observed in the previous section, consumption is stronger than income; so, savings, which
represents the difference between income andconsumption, should be shrinking. The trend ofhousehold savings (figure 2-14), however, indicates that the savings ratio is bottoming out forworkers’ households in the Family Income andExpenditure Survey as well as on an SNA basis.13 The SNA-based savings ratio has been flat
since 2002, and the ratio for workers’ households
is considered to be bottoming out in 2004.14
The most recent SNA-based data are for
2003, so we must rely on the workers’ household
data to examine current trends in income andconsumption (figure 2-15). Income and conto the quarterly reference dates of business cycle).
13
The savings ratio for workers’ households in the Family
Income and Expenditure Survey is considerably higher thanthe SNA-based ratio, apparently because the former do notinclude jobless households (see figure 2-17 for the savings
ratio of jobless households). For further information on thecauses of divergence between the two sources, see Yasushi
Iwamoto, Tetsu Ozaki and Yuki Maekawa (1995 and 1996),“Divergence between ‘Family Income and Expenditure
Survey’ and ‘National Accounts’ on the Trend of Household Savings Ratio (1) and (2),” Financial Review No. 35
and 37, Ministry of Finance Institute of Fiscal and Monetary
Policy.
14
Calculated from seasonally adjusted values for January-November.

sumption have both been declining since 1997 inworkers’ households. However, consumption has
been decreasing less steeply than income, resulting in the reduction of savings (i.e., income minus consumption) since 1998. The phenomenon
that consumption does not decline as fast as income in a recession is known as the “ratchet effect”. 15 However, savings are increasing in
200416 as consumption has not kept pace with
the increase in income.
Figure 2-16 shows the surplus or deficit
trend of financial asset flows in the household
sector. As a rule of thumb, a surplus or deficit infinancial asset flows is equivalent to the
SNA-based amount of savings excluding funds
invested in real estate. The data indicate that thefinancial surplus declined and finally reversed in
2003, but then returned in 2004. Thus, financial
asset flows in the household sector are bottoming
out in 2004, almost in parallel with savings.
In the final analysis, the decline in the savings ratio has halted as income has bottomed out.
A further recovery in household income would
certainly end the decline in the savings ratio, due
to the income factor.
However, the savings ratio will inevitably
shrink as the population ages. The share of jobless households has risen in recent years as thenumber of elderly households rises (figure2-17). 17 Since the savings ratio of joblesshouseholds is negative, the progress of aging will
depress the savings ratio as a whole; thus so thesavings ratio will likely resume its decline in the
future. The pace of decline, however, will depend on the extent of recovery in income.

6.

Personal Consumption on the Rise but
Slightly Slowing(see p. 30 for figures)

The nominal living expenditure of all households
in the Family Income and Expenditure Survey(figure 2-18) rose on the previous year for threeconsecutive quarters in 2004,18 but is now falling due to relatively moderate temperatures aswell as natural disasters including typhoons 19
and earthquakes.
On the supply side, the retail sales index isnow bottoming out (figure 2-19). We cannot be
optimistic about the sales trend, however, because much of the increased sales value offuel-related products is due to higher crude oil
prices. By product, sales of home appliances are
increasing, as buoyant sales continue forflat-panel TV sets and DVD players.20
Consumer confidence indicators are rather
weak in general. As regards the Consumer Confidence Index (expectations for the coming six
months) 21 (figure 2-20 (1)), the latest survey
found that the “employment” situation was expected to continue to improve while other items
including “overall livelihood” were expected todeteriorate, effectively halting the improvement
in consumer confidence. The Living Insecurity
Index (figure 2-20 (2)) remains flat, although it
has been improving in general. Also, improvement in the Nikkei Consumption Forecast Index
has been slowing, showing no significant movement recently.
Thus, consumer confidence indicators are
weakening slightly as personal consumption
slows down. However, this is mostly due to extraordinary factors such as weather and natural
disasters, and the underlying income situation is
18

15

The ratchet effect occurs primarily because consumers do
not immediately change their traditional behavior, regarding
economic fluctuation as temporary.
16
Calculated from seasonally adjusted values for January-November.
17
Jobless households whose heads are 60 or older accounted for 93.0% of the total jobless households (as of2003).

Some attribute the extraordinary year-on-year increase
recorded in January-June 2004 to possible overestimation
caused by a change in the sample households surveyed..
19
Japan Meteorological Agency data indicate that four
typhoons landed in Japan in September-November 2004,
tying the record number since 1951.
20
Data according to the Nippon Electric Big-Stores Association (NEBA).
21
In April 2004, the Cabinet Office consolidated the former
Consumer Confidence Survey, Monthly Consumer Confidence Survey and One-person Households Consumer Confidence Survey into the new Consumer Confidence Survey.
Also, the item “perception of price” was excluded from thecalculation of the consumer confidence index.
Development Bank of Japan Research Report/ No. 51

9not deteriorating. The disappearance of thosefactors should cause personal consumption torise, as the income situation bottoms out.
7.

Continued Increase in Business Investment Shows Signs of Slowdown(see p. 31 for figures)

Business investment continues to increase, but
weakness is observed in some leading indicators.
According to the Financial Statements Statistics of Corporations by Industry, business investment in all industries grew 14.4% on a year
earlier, the sixth consecutive quarter of increase.
Data by industry (figure 2-21) indicate that investment is increasing in both the manufacturing
and the non-manufacturing sector, as return on
investment rises in line with growing corporate
profits. In the manufacturing sector (up 14.8% on
a year earlier), business investment increased forthe sixth consecutive quarter, led by active investment in electrical machinery for digital homeelectronics and new model investment in automobiles. Investment rose for the fourth straightquarters in non-manufacturing (up 14.2%), led
by retail and services.
Figure 2-22 shows the movement of machinery orders (private demand excluding ships
and electric power), a good leading indicator of
business investment. In the manufacturing sector,
the year-on-year growth of machinery orders has
been slowing in general since mid-2004, with adecrease in orders received from electrical machinery, mainly for semiconductor equipment.
Machinery orders in the non-manufacturing sector remain flat overall, depending on orders received from the heavyweight communicationsindustry. The floor area of building construction
started (figure 2-23), a leading indicator ofbuilding investment, has been rising mainly forplants and stores, continuing to record double-digit increases in 2004. Since machinery orders generally lead business investment by two
to three quarters, machinery investment in theyears ahead may decrease on a year earlier, particularly in the manufacturing sector, whilebuilding investment is expected to follow its uptrend.
However, the capacity utilization ratio (figure 2-24) remains high in the manufacturing

10

Development Bank of Japan Research Report/ No. 51

sector as a whole, despite slight declines in someindustries including electrical machinery due to
production adjustment. The high ratio may be
explained by the reduction in production capacitywith the progress in corporate restructuring, as
well as the continuation of substantial capacity
utilization in materials industries (including iron& steel) and automobiles amid the tight supply-demand condition. Moreover, the diffusionindex of production capacity (“excessive capacity” minus “insufficient capacity”) has been improving in the manufacturing sector as a whole,although the improvement in perceived excessive
capacity is peaking in some industries including
electrical machinery. Thus, business investment
is not likely to drop much, at least in the near
future.
8.

Residential Investment Stays Flat(see p. 32 for figures)

Housing starts (seasonally adjusted annual rate)
have stayed just under 1.2 million units since2001 (figure 2-25).
However, the trend by region indicatessome changes (figure 2-26). Housing starts weretraditionally led by the Tokyo metropolitan area
but the contribution in that area has waned recently, whereas improvement in “other” regions22 has become more prominent.
The diffusion index of orders received forsingle-dwelling, custom-built houses (figure2-27) is often regarded as a good leading indicator of construction starts for owner-occupied
houses. According to the index, improvement inconstruction starts is expected in the quarters
ahead. Thus, the number of construction starts
for owner-occupied houses, which has stayed
relatively flat, is not likely to drop significantly.
Residential land prices (figure 2-28) are still
falling, thus encouraging housing purchases.
As a reference on interest rates, figure 2-29
shows the trends in the lending rate of the Government Housing Loan Corporation (basic interest rate on personal loans). The rate turned up in
the second half of 2003, effectively raising expectations of higher interest rates. Thus, the cur22

Regions other than the Tokyo metropolitan area, Kinki
region and Chubu region.

rent housing investment may be partially supported by greater demand in expectation of a
possible rise in interest rates.
Thus, the fall in land prices and expectationsof higher interest rates will have a positive impact on housing investment. It is true that thephasing out of tax breaks for mortgage loans is anegative factor (figure 2-30), but further recovery in the employment and income situations will
support housing investment in the years ahead.
9.

Constant Decline in Public Investment
due to Financial Squeeze(see p. 33 for figures)

Public investment continues to decline. As
shown in figure 2-31, public investment (public
fixed capital formation23) has been declining due
to cuts in expenditures forced by financial difficulties. Consequently, public investment now
accounts for only 4.6% of nominal GDP (seasonally adjusted nominal value). Although government final consumption has leveled off since
2000, it remains substantial, largely due to increased pension benefit payments and medicalcare expenses. Indeed, it accounts for as much as
17% of nominal GDP.
The value of public works contracted, aleading indicator, fell 13.7% year on year in
FY2003, the fifth straight year of decline (figure2-32). Public works implemented by the central
government continue to decline due to spending
cuts in line with the budget reform policy of theKoizumi cabinet. Public works by local governments have also been decreasing, largely due tothe lack of financial resources. Thus, the total
value has continued to decline, down 15.7% in
October-December 2004.
The supplementary budget for FY2004 included public investment of ¥1 trillion for relief
efforts following the major earthquake in Niigata-Chuetsu and damages caused by typhoons.24
In the FY2005 budget (government draft), 25
however, expenditures related to public works
23

Public fixed capital formation includes general government, plant and equipment of public corporations and public
dwellings.
24
FY 2004 Supplementary Budget (Ministry of Financewebsite, December 20, 2004).
25
December 24, 2004.

projects will be cut 3.6% (year on year), as public investment continues to shrink.
As regards revenues, the supplementarybudget for FY2004 does not envisage additional
government bond issues, for tax revenues are
expected to rise by about ¥2 trillion, thanks toincreased corporate and income tax payments on
the back of economic recovery. Nonetheless,public finance remains tight, as the outstanding
long-term debts of central and local governments
will exceed ¥700 trillion for the first time, totaling ¥719 trillion at the end of FY2004 according
to the initial budget (figure 2-33).
How does Japan fare in comparison withother developed countries in terms of public finance? Public investment of general government
in Japan is declining as a percentage of nominal
GDP, but still exceeds the levels of other developed countries including the U.S. and the U.K.
(figure 2-34). As regards the outstanding debts ofgeneral government (as a percentage of nominal
GDP), the Japanese government has been far
more deeply indebted in recent years than its U.S.
and euro-area counterparts. An OECD estimate
predicts that the outstanding debts of Japanesegeneral government will account for 175% of
nominal GDP in 2006. The primary balance(budgetary balance excluding bond issues, interest payments and bond redemptions) remains
poor, but a slight improvement is expected starting in 2004 thanks to reduced public investment
and recovery in tax revenues (figure 2-35).
10.

Exports Level Off, Current AccountSurplus Shrinks(see p. 34 for figures)

Trends in foreign exchange rates are shown infigure 2-36. Since 2002, the yen/dollar market
rate has declined almost 30% from ¥130/$ tonear ¥100/$, but the real effective exchange rate
has hardly changed, due to the unilateral depreciation of the dollar against the euro and othermajor currencies and lower price inflation in Japan than in the U.S. This can also be attributed tothe decline in the share of the U.S. dollar inJapanese merchandise trade. Indeed, the appreciation of the yen against the dollar has had little
impact on Japanese exports so far in the current
economic recovery phase.

Development Bank of Japan Research Report/ No. 51

11

Japanese exports have leveled off since
mid-2004 after increasing in line with economic
expansion in the U.S. and Asia. Imports havebeen rising gradually as the domestic economy
recovers (figure 2-37). One of the structural factors behind the simultaneous increase in exports
and imports is the international division of laborwithin the Asian region.
Looking at a breakdown of exports bycountry (figure 2-38), booming exports to Asia,
particularly to the fast-growing China, have led
the overall growth in the current economic recovery phase since April-June 2002. Exports to
the U.S. continued to decline throughout 2003 as
local auto production facilities became operational and office equipment production for the
U.S. was transferred to plants in other Asian
countries. The decline almost halted in 2004, but
total exports are leveling off as the growth inexports to Asia slows down.
Figure 2-39 shows the trend of exports bytype of goods, based on the estimates of industrial and mining shipments for export, publishedby the Ministry of Economy, Trade and Industry.
Producer goods made the greatest contribution at
the start of the economic recovery in the first halfof 2002, as well as in mid-2003 when exports
rebounded after a temporary lull. Subsequently,
the contribution of capital and consumer goods
also increased, led by strong demand in China.
However, exports of producer goods and capital
goods are now leveling off.
Figure 2-40 shows the trade balance. The
trade surplus has been shrinking gradually sinceApril-June 2004 as exports have slowed andcrude oil prices have risen. In October and November 2004 the trade surplus declined on a
year-on-year basis. The rise in crude oil andother fuel prices is estimated to reduce the trade
surplus by some ¥3 trillion per year. Nonetheless,the impact is not comparable to the previous two
oil crises, as crude oil now accounts for a smaller
share of imports.
In addition to the decline in trade surplus,
the rebound in the number of overseas travelers
following the end of the Afghan and Iraq wars
and the SARS epidemic has increased the service
trade deficit. Thus, the current account surplus
has reduced to some ¥16 trillion on an annual
basis (figure 2-41).

12

Development Bank of Japan Research Report/ No. 51

11.

Exports – Characteristics of the Current
Recovery Phase (see p. 35 for figures)This section compares the trend of exports thathave led the current economic recovery phase(since January 2002)26 and past export trends inthe four previous recovery phases since the1980s.
As compared with the four previous cases,
the current recovery is typically led by external
demand, with substantial contribution from exports and net exports (figures 2-42 and 2-43).
The rate of contribution is even more significant
because the contribution has increased while
overall GDP growth has been declining. Exports
played a small role in the recovery phase startingin November 1986, which was led by domestic
demand; indeed, net exports made a negative
contribution overall. In the most recent previous
recovery phase (Q1 1999 to Q4 2000), the contribution of exports and net exports at the initialstage was comparable to that in the current phase.
The substantial contribution and the recovery
phase itself were short-lived, however, as exports
fell soon afterwards due to the accumulation of
IT-related inventories.
Industrial and mining shipments for exportby type of goods (figure 2-44) indicate a growing
contribution of producer goods, which may be
explained as follows: increased direct investment
overseas for the development of local production
facilities stimulates exports of investment goods;
once the production facilities become operational,
they start to import producer goods from Japanfor product assembly. However, the contributionof investment goods has been more significant in
the current recovery phase than in the previous
one, due to increased exports of capital goods in
response to buoyant fixed capital investment in
China.
Figure 2-45 shows the value of exports bydestination. The largest contribution comes fromexports to NIEs in the two previous recovery
phases as well as in the current phase. In thecurrent phase, however, exports to China make acomparable contribution. In contrast, the contribution of exports to the U.S. is negative despite
the economic recovery.
26

Preliminary date.

Even though direct exports to the U.S. are
falling, producer goods exported to Asia might
be assembled and then exported to the U.S. asfinished products. In other words, indirect exports to the U.S. could actually be increasing. To
what extent do direct and indirect U.S. imports
affect Japanese exports? To answer this question,
we analyzed the chronological change in this
impact. Figure 2-46 shows the result of our estimation. 27 Here, the explained variable is theJapanese export volume index, while the explanatory variables include real U.S. imports andthe nominal effective yen rate. We compared thevalues of coefficients among the periods between
two peaks of the Japanese economy. The results
showed that the coefficient of real U.S. imports(β) was highest in the periods between October-December 1997 and October-December 2000
and between October-December 2000 andJuly-September 2004. Thus, the impact of U.S.
imports on Japanese exports has been rising inrecent years, which implies that increased exports to the U.S. from Asia are stimulating Japanese exports as a whole.
12.

Upward Pressure on Corporate andConsumer Prices to be Checked as
Crude Oil Prices Stabilize(see p. 36 for figures)

Prices of corporate goods (domestic demand
products28) have been rising year on year sinceApril-June 2004 mainly due to the rapid rise ininternational commodity prices. By industry, thenegative contribution of machinery has been diminishing, while there has been a positive contribution from energy (crude oil and petroleum &coal products in particular) and iron & steel.
Currently, the positive impact is rising fromchemicals & plastics including styrene monomer(figure 2-47).
Meanwhile, corporate service prices continue to decline by about 1% as a whole (figure2-48). Nonetheless, there has been a positive
contribution from transportation (overseas factor)
due to rising ocean tramper rates, whereas the27

The difference of logarithmic values from the previous
quarter is adopted here to remove the trend.
28
Domestic demand products represent the weighted average of domestic products and imports.

negative contribution of information services isnow shrinking.
Consumer prices (goods) have become almost flat, with the increase due to petroleum
products offset by the disappearance of the positive contribution of food, which had exerted upward pressure due to the poor rice harvest 29(figure 2-49).
Consumer prices (services) rose on the previous year as a whole from April-June 2003 toJanuary-March 2004, due to upward pressure
from public services as the self-pay ratio in
medical expenditures was raised. Since
April-June 2004, however, the negative contribution of public services 30 has been expandinglargely due to the reduction in electric utility and
fixed telephone rates, as well as the disappearance of the medical expense factor. Despite thepositive contribution of eating out, consumer
prices continue to show a deflationary trend as awhole (figure 2-49).
Crude oil prices, which were the main causeof the corporate and consumer goods price inflation, finally started to fall in November 2004.
Looking at the impact of speculative and commercial contracts31 on the growth in total crude
oil futures trading32 in the New York Mercantile
Exchange (NYMEX), fluctuation in speculative
contracts has a greater impact despite theirsmaller share. Hence, speculative contracts aswell as commercial buyers exerted a major effectduring the surge in crude oil prices against the
backdrop of international financial expansion
and active demand in China. As compared withgovernment bond and stock markets, the crude
oil market is considered to be more vulnerable to29

From October-December 2003 to July-September 2004.
Here, public services include electricity, gas and watersupply.
31“Speculative” and “Commercial” contracts are defined asfollows:“Speculative” = non-commercial positions + non-reportable
positions, and“Commercial” = commercial positions.
Many of the non-reportable traders are said to be speculators.
32
The number of open interests in crude oil (contracts for
1,000 barrels as at the end of the month) held by the traders(commercial and non-commercial) participating in the futures market. Total open interests are distributed among
reportable and non-reportable traders. The reportable traders
are required to report their trading activities to the Commodity Futures Trading Commission (CFTC).
30

Development Bank of Japan Research Report/ No. 51

13speculative behavior, due to the smaller numberof players. Since September 2004, the positive
contribution of speculative contracts to thegrowth of total trading has declined and reversed
to a negative contribution. Further withdrawal of
speculative money may alleviate the upward
pressure of high crude oil prices on corporate andconsumer prices (figure 2-50).
13.

Easy Money Policy Continues(see p. 37 for figures)

As regards quantitative financial indicators, themonetary base remains large although its
year-on-year growth has been slowing as quantitative monetary easing policy is still in placewith a direct guidance target set for the current
account balance. However, the money stock continues to grow slowly, in single-digit territory on
the previous year (figure 2-51).
The decline in outstanding private bankloans has eased somewhat recently. There has
been a clear improvement in the level after adjustment for extraordinary factors (such as fluctuations caused by the mobilization or amortization of credit loans), although the decline continues (figure 2-52).
Short-term interest rates (overnight unsecured call rate) have stayed near zero due to thequantitative monetary easing policy. Long-term
interest rates (yields on 10-year government
bonds) continue to fall as concern mounts aboutan economic slowdown, despite a temporary riseat the end of the year mainly influenced by shareprices (figure 2-53).
The attitude of financial institutions towardlending has softened, and contracted interest
rates on new bank loans continue to decline (figure 2-53). The diffusion index of lending attitudecontinues to improve for both large corporations
and SMEs, reaching +19 points and +5 points
respectively in December 2004 (figure 2-54).
The full lifting of the guarantee on bank deposits, scheduled in April 2005, is drawing near.

14

Development Bank of Japan Research Report/ No. 51

Substantial movements, such as the massive shift
from time and savings deposits to demand deposits that was observed before the partial removal in
April 2003, have not been discerned so far (figure2-55). As of December 2004, some 32% of thebanks have already introduced payment and settlement deposits (meeting the three requirementsof no interest, payment on demand and the provision of settlement service), while another 64%
are considering or preparing for their introduction. Although the progress differs by type offinancial institution, 90% of the financial institutions covered by the new regulation have alreadyintroduced, or are considering the introduction of,
payment and settlement deposits (figure 2-56).
14.

Trends in Non-lending Finance(see p. 38 for figures)

The condition of financing through marketablesecurities has been improving. As regards
straight bonds, the difference in yield spreads has
been reduced between A and AAA ratings. Indeed, the difference has shrunk to 1 bp between
A and AA ratings, and to 10 bps between AA
and AAA ratings (figure 2-57). BBB andlower-rated bond issues, which were extremely
difficult to execute in the past, have also been
increasing recently (figure 2-58). Moreover, thevalue of equity financing has been rising sharply
since the fourth quarter of 2003, mainly throughconvertible bonds (figure 2-59).
Other new developments are observed inrelation to bank loans. Commitment lines havebeen expanding in terms of both outstanding
contract amount and utilization rate, indicating
partial substitution for traditional bank loans(figure 2-60). The transfer of credit risk is also
making headway, although its value has had no
significant direct impact. Syndicated loans are on
the rise, primarily for unlisted firms (figure 2-61).
The outstanding amount of credit derivatives,
including credit default swaps, has been increasing since 2003 (figure 2-62).

I. World Economy: Expansion Slows
U.S. (1): Strong Personal Consumption and Business Investment Continued,
with Some Concerns over Future Downside Risk
Figure 1-1. Trends in Real GDP
12(annualized change on previous quarter, %)Personal consumption
Net exports
GDP growth rate

108Private residential investment
Government consumption and investment

Change in inventories
Private non residential investment

4.5

6

3.3

4.0

4
2
0
-2
-4

(CY quarterly basis)

-6
98

99

00

01

02

03

04

Source : U.S. Department of Commerce, “National Income and Product Account.”

Figure 1-2. Personal Consumption Trends
15(annualized change on previous quarter, %)(1985=100)

10
5
0
-5
(CY quarterly basis)

-10
98

99

00

01

02

03

Figure 1-3. Change in Disposable Income byComponent
20

150
140
130
120
110
100
90
80
70
60
50

15
10
5
0
-5

98

04

Disposable income factor

Personal consumption

Consumer confidence index (right scale)

Data for October-December 2004 represent average for
October and November.
Source : U.S. Department of Commerce, “Personal Income and Outlays.”

Figure 1-4. Household Liabilities andHousing Prices
10
9
8
7
6
5
4
3
2
1
0

99

00
Taxes

Note :(%)(CY quarterly basis)-10

Consumption propensity factor($ trillion)(annualized change on previous quarter, %)01
Income02

03

04

Growth of disposable income

Note :

Data for October-December 2004 represent average for
October and November.
Source : U.S. Department of Commerce, “Personal Income andOutlays.”Figure 1-5. Trends in Real Business Investment andCorporate Profits(annualized change on
previous quarter, %)(annualized change on
previous quarter, %)

14

20

12

15

30

10

10

20

8

5

10

6

0

0

4

-5

-10

2

-10

-20

0

-15

-2

-20

(CY quarterly basis)

40

-30
-40

91 92 93 94 95 96 97 98 99 00 01 02 03 04(CY)
Consumer credits
Home mortgages
Housing price growth (right scale)98

Note :

Source: U.S. Department of Commerce, “National Income and ProductAccount.”

Consumer credits and home mortgages represent
outstanding amounts (as at the end of September
for 2004).
Housing prices represent medians of new housing
sales prices (year-on-year change in JanuaryNovember prices for 2004).
Sources : FRB, “Flow of Funds”; U.S. Department of Commerce,“Housing Survey.”

99

00

01

IT-related (hardware)
Buildings
Overall business investment

02

03

04

IT-related (software)
OthersCorporate profits (right scale)

Development Bank of Japan Research Report/ No. 51

15

U.S. (2): Healthy Growth of Production and Employment, Stable Share Prices and Interest Rates
Figure 1-6. Industrial Production Index andCapacity Utilization in Manufacturing(1997=100）

125

(%)

120

Figure 1-7. Change in Number of Employees andUnemployment Rate(change on previous quarter, 10,000 persons)
90
85

(%)
7

150
100

6

50

115

5

80
0

110
75

105

z

-50

70

100
98

99

00

01

02

-100
98

03
04
(CY quarterly basis)

Manufacturing capacity utilization (right scale)Composite index
Total goods
Equipment

Source :

00

01

02

Mining/construction
Services, etc.

3

03
04
(CY quarterly basis)
Manufacturing
Government

Note :The number of employees represents monthly averagefor the non-agricultural sector.
Source : U.S. Department of Labor, “Employment Situation.”

Data for October-December 2004 represent average for
October-November.
FRB, “Industrial Production and Capacity Utilization.”

Note:

99

4

Changes in thenumber of employees

Unemployment rate (right scale)Figure 1-8. Prices
Core and composite index
5

PPI by stage of processing(change on previous year, %)84(change on previous year, %)6

3

PPI (finished goods)

42(change on previous year, %)30
20

PPI (intermediate goods)

10

2

1
0

0

0

-1
-2

-2

(CY quarterly basis)

-3

-10

PPI (crude materials)(right scale)-4(CY quarterly basis)

98
99
00
01
02
01
02
03
04
Producer prices (composite)
Consumer prices (composite)
Producer prices (core)Consumer prices (core)
Notes : 1. Consumer prices for October-December 2004 represent year-on-year change for October-November.
2. PPI by stage of processing represents core index.
Sources : U.S. Department of Labor, “Producer Price Index” and “Consumer Price Index.”

98

99

00

Figure 1-9. Stock Market Indexes($)(points)
3,000

11,0006(%)

10-yeargovernment bonds

2,500

Dow Jones
Industrial

4

9,000

2,000

8,000

1,500

3
FF target rate

2
Nasdaq Composite Index(right scale)

7,000
7

Sources :

16

1
1,000

1/02 4

10 1/03 4

04

Figure 1-10. Long- and Short-term
Interest Rates

5
10,00003

7

10 1/04 4

7 10(day basis)

Dow Jones; DRI database.

Development Bank of Japan Research Report/ No. 51

0
1/02

4

7

10 1/034

7

10 1/04

Sources : FRB data; Wall Street Journal .

4

7 10(day basis)-20

U.S. (3): Current Account Deficit and Savings-Investment Balance

Figure 1-11. Current Account Balance and U.S. Dollar Rates
2(2000 = 100)

(as % of GDP)

110
Currency
appreciation

1
0

100

-1
-2
-3

90

-4

Miscellaneous balance
Trade balance
Current account balance
Effective U.S. dollar rates (right scale)

-5
-6
86

87

88

89

90

91

92

93

80
94

95

96

97

98

99

00

01

02

03

04
(CY)

Figure 1-12. Trade Balance by Partner
1,000

Figure 1-13. Savings-Investment Balanceby Sector($ 100 million)
8

0

6-1,0004-2,0002-3,0000-4,000-6,000Household
Government
Corporate-2

OthersWest Europe
China
Japan
World

-5,000(as % of GDP)

-4
-6

-7,000

-8
86

88

90

92

94

96

98

00

02

04

86

88

90

92

94

96

98

00

02

(CY)

04
(CY)

Note : Annualized monthly or quarterly values for 2004.
Sources : U.S. Department of Commerce; FRB; IMF.

Development Bank of Japan Research Report/ No. 51

17

U.S. (4): External Credits/Debts and Balance on Income
Figure 1-14. Net External Assets and Balanceon Income($ trillion)($100 million)

8
6

Figure 1-15. Composition of Balanceon Income($100 million)
800

4,000
2,000

600

0
4

400

2

200

-2,000

95

0

-2

-200

30
-600
External debts
External assets
Balance on Income (right scale)Net external assets

-8

87

89

91

93

95

97

99

01

-800

20

-1,00015

Direct investment abroad

12

8

11

External assets

6

10

4

9

87

89

91

(%)

8

0

7
Foreign direct investment in U.S.
89

91

93

95

97

99

(CY)
01

93

Investment abroad
6

95

97

99

01 03
(end CY)

Notes :

-2
-4
-6
(CY)
00

01

02

(CY)

-8

03

1. For external assets and debts, Figures 1-14 through 1-17 use replacement values andFigure 1-18 uses acquisition values.
2. Yields on external assets or debts = profit receipts or payments / average amount of assets or debts.
Source U.S. Department of Commerce.

Development Bank of Japan Research Report/ No. 51

Investment in U.S.

0

6

03

(%)

2

EuropeWestern Hemisphere

18

03

4

External debts
2

87

02

Share in external assets

13

10

85

01

Other private payments
Other receipts
Direct investment profit receipts

Figure 1-18. Yields on Direct Investment
by Partner
14

-2

00

(%)

85

03
(CY)

(%)

12

99

25

Figure 1-17. Yields on External Credits
and Debts
14

98

Share in external debts

-10
85

97

Figure 1-16. Share of Direct Investment inExternal Credits and Debts

-400

-6

96

Other payments
Direct investment profit payments
Other private receipts
Balance on income

0

-4

(CY)

-4,00000

0102

CanadaAsia/Pacific03European Economies (1): Mild Slowdown
Figure 1-20. Real GDP of EU25
(quarter-on-quarter change
by component)

Figure 1-19. Real GDP of Major European Countries(annualized change from previous quarterby component)(annualized change on
previous quarter, %)10(1) Germany(1995 as base year)

10(annualized change on previous quarter, %)

1.7

5

8
0.4

0

6

-5
-10
98

99

00

(annualized change on
previous quarter, %)
10

01

02

04

4

(1995 as base year)203(2) France

1.3

2.6
0

5

▲ 0.1 -2

0
-5

-4
98

99

00

(annualized change on
previous quarter, %)

01

02

03

(3) U.K.

04

10

98

3.5

5
1.8

0
-5
Private consumption
Inventories
Exports
GDP

99

00

01

Private consumption
Inventories
Exports

02

03

04

Government consumption
Fixed capital formation
Imports (reverse sign)GDP

Source : Eurostat.

(CY quarterly basis)-10(CY quarterly basis)-6(2001 as base year)

Government consumption
Fixed capital formation
Imports (reverse sign)

Sources : Statistisches Budesamt (StBA), Direction Générale de l’Institut
National de la Statistique et des Etudes Economiques (INSEE) andU.K. Central Statistical Office data.

Figure 1-21. Trend of Unemployment Rates(ILO Standard)

Figure 1-22. German Manufacturing Sector

12(change on previous year, %)
6.0

11

4.0

0.5

2.0

0.0

0.0

-0.5

9

-2.0

-1.0

8

-4.0

-1.5

-6.0

-2.0

(%)

10

Germany
France
U.K.

7
6
5

-8.0

Real investment in machineryand equipment
Unit labor cost (right scale)

-10.0
-12.0

4

(change on previous year, %)
1.0

-14.0
99

00

01

Note:
Source :Seasonally adjusted.
OECD.

02

03

04

-2.5
-3.0
-3.5
-4.0

01

02

(monthly basis)
Source :03

04(CY quarterly basis)

Bundesbank.

Development Bank of Japan Research Report/ No. 51

19European Economies (2): Increased Presence of Euro
Figure 1-24. Consumer Prices and Monetary
Policy in Euro Zone

Figure 1-23. Trends in Foreign Exchange Rates(dollar/euro)

1.4
1.3

(Q1/1999 = 100)110Euro appreciation

1.1

100

↓

1.0

90

0.9
(daily basis)

1/1/034
3
2Euro depreciation

0.8
1/1/02

(%)

6
5

↑

1.2

120

80
1/1/05

1/1/041(monthly basis)

0
99

00

01

European Central Bank.

Sources :Figure 1-25. Straight Bond Issues by Currency
900($ billion)

700

ECB; Eurostat.

(%)

80
13.5

600

04

Figure 1-26. Composition of World Foreign
Currency Reserves
100

U.S. dollar-denominatedEuro-denominated

800

03

Year-on-year change in consumer prices
Year-on-year change in consumer prices (core)
ECB intervention rate

Dollar/euro
Nominal effective exchange rate (right scale)
Source :

02

16.3

16.7

19.3

19.7
Others

60

500

Euro

400

40

300
200

64.9

66.6

66.9

63.5

63.8

99

00

01

02

03

U.S.
dollar

20

100
0

0
99
Source :

00

01

02

03

BIS, “Quarterly Review.”

Source :IMF, “Annual Report 2004.”

Figure 1-27. Composition of German Exports by Partner (2003)
12 euro-zone countries
EU25 (excluding euro-zone countries)
Other Europe
U.S.
Asia
Others
Source :20

Development Bank of Japan Research Report/ No. 51

Bundesbank.

(end CY)Economies of Major Asian Countries (1):Rapid Growth Led by Exports, Slight Slowdown in 2005
Figure 1-28. Real GDP Growth Rate
15

Korea

(%)

Singapore (right scale)Taiwan

5.4

5.3

4.6

10

(%)

15
10
5

5

0
0

-5

-5

-10

(preliminary figures
for Q4/04)

-15

-10
99

01

03

I
03

III

I
04

III

99

01

03

Fixed capital formation
Net exports
99

00

01

ＧＤＰ

02

03

III

I
04

I 03

II

III

IV

I 04

II

I
03

III

I
04

III

III

Figure 1-30. Foreign Exchange Rates(against dollar)

(%)

115

(initial 1999 level = 100)

110
105
100
(CY quarterly basis)
99

00

01

Korea

02

03

Taiwan04
Singapore

Figure 1-31. Price Inflation
6

03

Government consumption
Change in inventories

4.6

Figure 1-29. Manufacturing
Sector Production Index
30
25
20
15
10
5
0
-5
-10
-15
-20

01

Private consumption
Errors

(%)

15
10
5
0
-5
-10

I
03

III 99

95
90
Ⅰ
99

Ⅲ

Ⅰ
00

Ⅲ

Ⅰ
01

Ⅲ

Ⅰ
02

Ⅲ

Ⅰ
03

Ⅲ

Ⅲ

Ⅰ
04

(CY quarterly basis)

Figure 1-32. Economic Growth Outlook
(ADB)
(%)

(%)

Korea

TaiwanSingapore

2003

3.1

3.3

1.1

2

2004

4.4

6.0

8.1

0

2005

3.6

4.8

4.2

4

(CY)

(CY quarterly basis)

-2
99

00

01

02

03

04

Note :
Growth rate represents year-on-year change.
Sources : Korea National Statistical Office; Executive Yuan of the Republic of China; Singapore
Department of Statistics; DRI; Asian Development Bank, “Asian Development Outlook
October/2004” (for Figure 1-32 only).

Development Bank of Japan Research Report/ No. 51

21

Economies of Major Asian Countries (2): Increased Dependency on Exports to China

Figure 1-33. Exports by Trading Partner($ billion)

300

Singapore

Taiwan

Korea

250
200
150
100
50
0
93 94 95 96 97 98 99 00 01 02 03 04

93 94 95 96 97 98 99 00 01 02 03 04

93 94 95 96 97 98 99 00 01 02 03 04

(CY)
China

Hong Kong

Other Asia

Figure 1-34. Taiwan’s Direct
Investment Abroad
12($ billion)

U.S.

EuropeOthersFigure 1-35. Korea’s Major Export Goods(Annual Growth by Trading Partner)
18($ billion)

16

10

14

8

12
10

6

8
6

4

4

2

2
0

0
93 94 95 96 97 98 99 00 01 02 03 04
(CY)
China
EuropeHong KongJapan

00 01 02 03 04
Semiconductors

U.S.
Others00 01 02 03 04
Other electronicparts & devices

China
U.S.
Japan
Singapore00 01 02 03 04
Communicationequipment

00 01 02 03 04
Automobiles

Hong Kong
Major European countries
TaiwanOthers

1. Data for 2004 in Figure 1-33 represent cumulative values through November for Korea and Taiwan, and annualized cumulativevalues through September for Singapore.
2. Direct investment in Figure 1-34 is based on approvals.
3. In Figure 1-35, “semiconductors” include chips, wafers, DRAMs, SRAMs, flash memories, CPUs, etc. “Other electronicparts & devices” include main boards and sound cards among others. Data on “semiconductors” are not published for2000 and 2001.
Sources : National statistics.

Notes :

22

Development Bank of Japan Research Report/ No. 51(CY)China (1): Mild Slowdown in Investment
Figure 1-36. Real GDP Growth
(%)
6

12
10

9.3

Figure 1-37. Composition of Investment
Completed (1)(trillion yuan)
(%)

5

8

9.1

6

3

2

2

0

40

4

4

30

26.7
26.8

0

-4
99 00 01 02 03

Fixed capital formation
Government consumption
Net exports

Private consumption
Change in inventories
Growth rate

Total

Figure 1- 38. Composition of Investment
Completed (2)< In d u s tr ie s w ith la r g e s t c o n tr ib u tio n >0
Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ
02
03
04

99 00 01 02 03

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ
02
03
04

Change on previous year (right scale)Figure 1-39. Retail Sales of Consumer Goods(Ju l.-S e p t. 2 0 0 4 )C hange on
p re v io u s y e a r

S h a reC o n trib u tio n1 ) R e a l e sta te

3 0 .7 %2 4 .9 %2 6 .9 %2 ) E le c t ric ity /g a s/ w a t e r

4 7 .4 %7 .9 %

1 3 .1 %3 ) T ra n sp o rt

2 2 .4 %1 2 .9 %1 0 .2 %5(%)(trillion yuan)

10

9.1

3
2

Jul.-Sept.

5

1

Change onprevious year

Share

Change onprevious year

Share

Eastern provinces

20.0%

54.6%

28.9%

54.3%

Central and western provinces

29.8%

45.4%

27.8%

45.7%

Total

24.3%

100.0%

28.4%

100.0%

00
99 00 01 02 03
AmountFigure 1-40. Prices and Money StockⅠ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ
020304
Change on previous year (right scale)Figure 1-41. Exports and Imports
(%)

(%)

15

13.4

4

<By region>
Apr.-Jun.

20
10

1

-2

50

16
14
12
10
8
6
4
2
0
-2
-4
-6

(million dollars)

(%)

60

22

50

20

40

18

30

30

16

20

20

14

10

12

0

50
40

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 1102
03
04
Consumer price index
Raw material price index
Money stock (right scale)

10
0
-10
99 00 01 02 03

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ
02
03
04

Exports
Export growth (right scale)

Imports
Import growth (right scale)Note :The growth rate represents change on the previous year.
Sources : IMF, “International Finacial Statistics”; China Statistical Yearbook; China Monthly Economic Inicators; and People’s Bank of
China data.

Development Bank of Japan Research Report/ No. 51

23

China (2): Trade Structure in Three Years following WTO Accession
Figure 1-42. China’s Major Trading Partners and Share in World
6

Exports($ 100 billion)

(%)

8
7
6
5
4
3
2
1
0

5.8

5
4
3
2
1
0
99

00

01

02

Japan
Korea
EU
Exports (world share, right scale)Note :

Imports($ 100 billion)

6

(%)
5.3

5
4
3
2
1
0

03
04
(annualized rate）

99

00

01

02

Japan
Korea
EU
Imports (world share, right scale)U.S.
TaiwanOthers

8
7
6
5
4
3
2
1
0

03
04
(annualized rate）
U.S.
TaiwanOthers2004 figures represent annualized cumulative values through October.

Figure 1-43. Trade Balance by Partner(before and after accession to WTO)($100 million)
Trade balance by partner (2000)

Total($100 million)
Trade balance by partner (2004, annualized rate)

Exports Imports Trade balance
2,492
2,251
241

Of which
U.S.
EU

521
382

224
308

297
74

Total
Of which
U.S.
EU

Japan
Korea
Taiwan

417
113
50

415
232
255

2
? 119
? 205

Japan
Korea
TaiwanExports Imports
5,624
5,494

Trade balance
131

1,196
1,015

442
690

755
325

701
262
126

929
608
635

? 228
? 347
? 509

Note : Data for 2004 represent annualized cumulative values through October.

Figure 1-44. Share of Foreign Affiliates
in Chinese Trade and Foreign Direct
Investment in China

70
60

(%)

Figure 1-45. Foreign and Indigenous Capital in
Industrial Production (2003)($10 billion)
56.2%

54.5%

10

30

8

25

50
54.8%

40

6

40.7%

30

Indigenous capital
Foreign capital
Share of foreign capital (2003, right scale)
Share of foreign capital (2000, right scale)

15

100%

75%

50%

4
10

20
2

10
0

0
97

98

99

00

01

02

Sources :003Foreign direct investment in China (implementationbasis, right scale)
Share of foreign capital in exports
Share of foreign capital in imports

25%
5

Fo
o
Sp d &
inni bevng
e& rageKw
W nitsoo tin eav
dw g & i n
g
or
k lea
&
th
e
fu
r
Pu rniCe
lp tur
& e
M me
et
P
al nt, c
Ch aperee
fin ram em r
ic
in
a
g ics
an & l sdg
pr lasocseTran
M ssinspgao ch
El rt e ine
ec qu ry
tri ipc m meac nthEl ine
ec ry
tro
ni
cs

96

24

20

(rmb100 million)“China Statistical Yearbook”; “China Monthly Economic Indicators”; WTO, “International Trade Statistics.”

Development Bank of Japan Research Report/ No. 51

0%II. Japanese Economy: Pause in Recovery
Overview: Showing Perseverance Supported by Brisk Corporate Sector
Figure 2-1. Trends in Real GDP(annualized rate of change from the previous quarter by component, seasonally adjusted)
(%)
10

5/97

11/00

1/99

1/02
Exports

8

Government
consumption

6
4
2

Private consumption
Business investment

0
-2
-4

Inventory investment
Public investment
Imports(reverse sign)-6-8

Quarter-on-quarter change in GDP-10

Residential investment-1297
Notes :

Source :98

99(CY quarterly basis)

00

01

02

03

04

1. Contributions of private business investment and public investment in January-March and April-June 2004 are based on the series of seasonallyadjusted real quarter-on-quarter changes excluding the impact of government’s large-scale asset purchases from the private sector in JanuaryMarch 2004 (values published by the Cabinet Office).
2. Contribution to annualized GDP is prorated to each item based on its share in contribution before annualization. Government
consumption includes the contribution of public inventories.
Cabinet Office, “National Accounts.”

Figure 2-2. Trends in Production Indicators(seasonally adjusted)
5/97

115

1/99

11/00

Construction activity index(2000=100, weight: 7.0%)

110

1/02
Tertiary industry activity index(2000=100, weight: 60.4%)

105
100
95
90
Industrial production index(2000=100, weight: 20.2%)

85
80
97

98

99

00

01

02

03

04
(CY quarterly basis)

Notes :

1. Weights represent shares in all-industry activity index (GDP from the supply side) and add up to 100 in sum with the agriculture,
forestry and fishery production index (weight: 1.6%) and public service activity index (10.8%).
2. For October-December 2004, the industrial production figures represent the average of actual figures for October and November
and estimate for December based on the Survey of Manufacturing Production Forecast. The construction and tertiary industry
figures represent October only.
Source : Ministry of Economy, Trade and Industry.

Development Bank of Japan Research Report/ No. 51

25

Inventories Stay Low despite Adjustment in Some Producer Goods(1) Total of mining and manufacturing sector

107-9/04 10-12/00 (peak)
4-6/97 (peak)

1-3/0410-12/02

Concept

7-9/030

10-11/04

1-3/99 (trough)-5

1-3/98-10

7-9/01

1-3/02 (trough)45-degree

Change in shipments on
previous year (%)

5

Buildup phase
Unintended
accumulation
Recovery
Adjustment
Change in inventories on previous year (%)

-15
-10

-5

0
5
10
Change in inventories on previous year (%)(2)-2. Electronic components and devices(2)-1. Producer goods
15

7-9/04 1-3/04

10-12/02

10-12/00 (peak)

1054-6/97 (peak)0

7-9/03
1-3/99 (trough)10-11/04-5-10

1-3/02 (trough)7-9/01

-15
-15

-10

-5

0
5
10
Change in inventories on previous year (%)

10-12/00 (peak)

15

7-9/04

1-3/04

10-11/04

10

10-12/02

5

7-9/030

4-6/97 (peak)-5

1-3/98-10-15 1-3/99 (trough)7-9/01-20

1-3/02 (trough)

-25
-20

-15

-10

40

10-12/02

30
20

1-3/0410

7-9/030-10(2000 = 100)

11/01 (peak)

10-12/01-50
510Change in inventories on previous year (%)

1/02 (trough)-20

10-11/04

-30
-40
-40

-30

-20

-10

10

0

10
20
30
40
50
Change in inventories on previous year (%)

10-12/00 (peak)

5

1-3/99 (trough)

Production index
Inventory ratio index

10-11/04

10-12/02

4-6/97 (peak)

7-9/04
1-3/040
7-9/01-5
1-3/02 (trough)

-10
-15

-10

-5

1-3/98

7-9/030
510Change in inventories on previous year (%)

Figure 2-5. Shipment-Inventory Balance
for Electronic Parts & Devices
75

150

7-9/04

1-3/99 (trough)1-3/02 (trough)Figure 2-4. Inventories and Production ofElectronic Parts & Devices

170

10-12/00 (peak)(4) Consumer goods(3) Capital goods (except transport equipment)
20

Change in shipments on previous year (%)-15

Change in shipments on previous year (%)

Change in shipments on previous year (%)

Change in shipments on previous year (%)

Change in shipments on previous year (%)

Figure 2-3. Inventory Cycle

(%)

(%)

40

45

30

30

20

15

130

10

0

0

-15

110

-10

-30

(CY quarterly basis)

7000Note :
Source :

26

-20

-45

90

01

02

03

04

-60

(monthly basis)-75
99

Shipment-inventory balance in Figure 2-5 represents year-on-yearchange in “shipment” index – year-on-year change in “inventory” index.
Ministry of Economy, Trade and Industry, “Indices of Industrial Production.”

Development Bank of Japan Research Report/ No. 51

50

60

00

01

02

03

04

Shipment-inventory balance (five months earlier)
Production (right scale)

05

-30
-40

Employment Situation Continues to Improve as Job Offers Increase
Figure 2-6. Trends in Ratio of Job Offers to
Applicants and Unemployment Rate
0.9

(times)(%)

0.8

Figure 2-7. Overtime Hours
6
5

0.7

120

(index, 2000=100)
All industries
Manufacturing

110

4

100

0.6
3

0.5
0.4

2

Ratio of job offers to applicants
Unemployment rate (right scale)(CY quarterly basis)

0.3

1

97

98

99

00

01

90

02

03

(CY quarterly basis)

80
97

04

Note :
Seasonally adjusted.
Sources : Ministry of Internal Affairs and Communications, “Labour
Force Survey”; Ministry of Health, Labour and Welfare,“Statistics on Placement Activities.”

98

99

00

01

02

03

04

Note:
Seasonally adjusted.
Source : Ministry of Health, Labour and Welfare, “Monthly
Labour Survey.”

Figure 2-8. Trend of Year-on-Year Change in Number of Workers and Employees by(1) By industry (new industrial classification)
100(10,000 persons)(2) By status
110

50

60

0

10

-50

-40

-100

-90
(CY quarterly basis)

-150

99

00
01
Construction
Wholesale and retail trade
Services
Total

-140
02

03
Manufacturing
Transport
Others(10,000 persons)(CY quarterly basis)
97

04

98

99
00
01
02
03
Employees (temporary and daily)
Employees (regular)
Self-employed and family workers
Total number of workers

04

Figure 2-9. New Job Openings(year-on-year change by component)(3) By size of corporation (excluding agriculture,
forestry, fisheries and government)

100(10,000 persons)

30

(%)

20

50

10
0
0
-50
-100

-10
(CY quarterly basis)
97

98
99
00
01
1-29 employees
500 employees or over(CY quarterly basis)

-20
02
03
04
30-499 employees
Total

Source : Ministry of Internal Affairs and Communications,“Labour Force Survey.”

97
98
99
00
Part-time employees
Temporary/seasonal workers

01

02
03
04
Full-time employees
Total

Figures for October-December 2004 represent OctoberNovember average.
Source : Ministry of Health, Labour and Welfare, “Report on
Employment Service.”

Note :Development Bank of Japan Research Report/ No. 51

27

Income Situation Stays Flat

Figure 2-10. Year-on-Year Change in Wages andSalaries per Person(%)

4

Figure 2-11. Nominal Compensation of
Employees(¥ trillion)

285
Bonus and special earnings

3

Overtime pay
Regular wages and salaries

2

280

Total wages and salaries

275

1

270

0
-1

265
Nominal
Real

-2
260

-3
(CY quarterly basis)

97

98

99

(CY quarterly basis)

255

-4
00

01

02

03

97

04

Note : Business establishments with five or more employees.
Source : Ministry of Health, Labour and Welfare, “Monthly Labour
Force Survey.”

99

00

01

02

03

04

Notes :

Seasonally-adjusted annualized rate. Real values are based on
the chain-linking method (2000 as reference year).
Source : Cabinet Office, “National Accounts.”

Figure 2-12. Labor’s Share74

98

Figure 2-13. GDP-Based Consumption

(%)

300

(¥ trillion)
Real

72

Nominal

295

70
290

68
66

285

64

All industries
ManufacturingNon-manufacturing

62

280(CY quarterly basis)60(CY quarterly basis)

275

97

98

99

00

01

02

03

04

Note :
Four-period backward moving average.
Source : Ministry of Finance, “Financial Statements Statistics ofCorporations by Industry, Quarterly.”

28

Development Bank of Japan Research Report/ No. 51

97

98

99

00

01

02

03

04

Seasonally adjusted annual rate. Real values are based on the
chain-linking method (2000 as reference year).
Source : Cabinet Office, “National Accounts.”

Notes :

Respite in Savings Drawdown to Compensate for Reduced Income
Figure 2-14. Household Savings Ratio

Figure 2-15. Trends in Consumption and Income

(%)

30

115

25

(1990 =100)(¥10,000)110

20Family Income and Expenditure
Survey (workers’ households)
SNA savings ratio

40

30

105

15

20
100

10
Income – consumption (right scale)
Consumption expenditure
Disposable income

95

5
(CY)

0

10
(CY)

90

0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04

Notes :

Notes :

1. Family Income and Expenditure Survey data cover
two-or-more-person-households.
2. Ratios for 2004 are calculated from JanuaryNovember data (seasonally adjusted).
Sources : Cabinet Office, “National Accounts”; Ministry ofInternal Affairs and Communications, “Family
Income and Expenditure Survey.”

1. Based on data for worker’s households. Monthly
average.
2. Data for 2004 represent annualized values for
January-November (seasonally adjusted).
Source : Ministry of Internal Affairs and Communications,“Family Income and Expenditure Survey.”

Figure 2-16. Flow of Household Financial Assets(Financial Surplus or Deficit)

Figure 2-17. Jobless Households: Saving
Ratio and Share in Total Households

10(¥ trillion)

30

(%)

(%)

30

Savings ratio of jobless households

8

20

6

10

20

4

0

15

2

-10

10

0

-20

5

-2

-30

0

99

00

01

02

03
04
(CY quarterly basis)

Note : Four-period backward moving average.
Source : Bank of Japan, “Flow of Funds.”

25

Share of jobless households in total
households (right scale)

90 91 92 93 94 95 96 97 98 99 00 01 02 03(CY)
Note : Data cover two-or-more-person households.
Source : Ministry of Internal Affairs and Communications,“Family Income and Expenditure Survey.”

Development Bank of Japan Research Report/ No. 51

29Personal Consumption on the Rise but Slightly Slowing
Figure 2-18. Nominal Consumption Expenditureof All Households (change on previous year)
3(%)

Figure 2-19. Retail Sales Index(seasonally adjusted)105（1Q/97=100）
Textiles, clothing, personal
items, foods and beverages

2
100

1

Householdmachines/appliances

095
Retailindustry total

-1
90

-2
-3

85

-4
(CY quarterly basis)

-5
99

00

01

02

Food
Fuel, light & water charges
Clothes & footwear
Transportation & communications
Reading & recreation
Total consumption expenditure

03

80

04

Housing
Furniture & household utensils
Medical care
Education
OthersAutomobiles

75

70
97

98

99

00

01

02

03

04

(CY quarterly basis)

Note :

Figures for October-December 2004 represent OctoberNovember average.
Source : Ministry of Internal Affairs and Communications, “Family
Income and Expenditure Survey.”

Notes :

1. Retail sales index except for total represents theaverage of published seasonally adjusted figures
weighted by the sales of each industry.
2. Figures for October-December 2004 represent
October-November average.
Source : Ministry of Economy, Trade and Industry, “Report of
the Current Survey of Commerce.”

Figure 2-20. Consumer Confidence Indicators(1) Quarterly change in consumer confidence index
6(%)(2) Other confidence indexes
180

4

160

2

140

Living Insecurity Index
Improvement

120

0

100

-2

Nikkei Consumption Forecast Index

Improvement

80

-4

(CY)

60

-6

(CY quarterly basis)-897Notes :

97

98

99

Overall livelihood
Price inflation
Employment

30

00

01

02

03

04

Income growthWillingness to buy durable goods
Consumer confidence index

Development Bank of Japan Research Report/ No. 51

98

99

00

01

02

03

04

Consumer confidence index is based on surveys forthe coming six months. Figures for individual components were redistributed from seasonally adjusted data.
Sources : Cabinet Office, “Consumer Confidence Survey”; Japan
Research Institute, “Consumer Sentiment Index”; Nikkei
Industrial Consumption Research Institute data.

Continued Increase in Business Investment Shows Signs of Slowdown
Figure 2-21. Year-on-Year Change in Nominal Business Investment and Investment Profitability
40

Manufacturing (corporations of all sizes)

(%)

30

Non-manufacturing (corpoations of all sizes)

(%)

13 30

Year-on-year change in business investment
Investment profitability in manufacturing (right scale)

20

9

10

7

0

5

-10

7

Year-on-year change in business investment

11 20

6

Investment profitability in manufacturing (right scale)

10

5

0

4

3 -10

3

1 -20

-20
(CY quarterly basis)

-30
97

98

99

00

01

02

03

2
(CY quarterly basis)-1 -30

04

97

98

99

00

01

02

03

1

04

Notes :

1. Business investment excludes software.
2. Return on investment = operating assets-profit rate – average contracted interest rates of banks (new loans, total),
where operating assets-profit rate = operating profit/(tangible fixed assets + inventories).
Sources : Ministry of Finance, “Quarterly Report of Statistical Survey of Incorporated Enterprises,” other.

Figure 2-22. Machinery Orders (change on previous year)
40
30
20
10
0
-10
-20
-30
-40

Manufacturing

(%)

30
20
10
0
-10
(CY quarterly basis)

97

98

99

00

01

Chemicals
General machinery
Automobiles
Manufacturing

02

03

-20

(CY quarterly basis)

-30

04

97

Data for October-December 2004 represent average for October andNovember.
Source : Cabinet Office, “Orders Received for Machinery.”00(seasonally adjusted, 2000=100)

(%)

115

20

110

10

105

0

100

-10

95

-20

90
(CY quarterly basis)-30
98

OfficeFactory
Others
Note :

99

99

00

01

02

03

04

Store
Warehouse
Non-residence total (private)

Data for October-December 2004 represent average for October andNovember.
Source : Ministry of Land, Infrastructure and Transport, “Building Construction
Started.”

01

02

03

04

Figure 2-24. Capacity Utilization Index and
Diffusion Index of Production Capacity

Figure 2-23. Floor Area of Building Construction
Started (by use) (change on previous year)

97

98

OthersReal estate
Finance/insurance
Wholesale/retail
Telecommunications
Construction
Non-manufacturing (excluding ships and electric power)

Iron/steel
Electric machinery
Others

Note :

30

Non-manufacturing(excluding ships and electric power)

(%)

85

(reversed scale, “excessive” – “insufficient,” %)-5

Diffusion index of production capacity in non-manufacturing (right scale)

0510Manufacturing capacity utilization index

15
20
25
30

Diffusion index of production capacity in manufacturing (right scale)

96

97

98

99

00

01

02

03

35
04

(CY quarterly basis)
Note :
Sources :The diffusion index of production capacity has a discontinuity due toa revision to its coverage in March 2004.
Ministry of Economy, Trade and Industry, “Industrial Index”; Bank ofJapan “Short-term Economic Survey of Enterprises in Japan” (Tankan ).

Development Bank of Japan Research Report/ No. 51

31

Residential Investment Stays Flat
Figure 2-25. Trend of Housing Starts(seasonally adjusted annual rate)
160

Figure 2-26. Housing Starts(year-on-year change by region)(10,000 units)

10

140

(%)

5

120
100

0

80
60

-5
Other regions
Kinki area
Chubu area
Tokyo metropolitan area
Total

40
20

-10

(CY quarterly basis)

0
97

98

99

00

01

02

03

-15

04

98 99 00 01 02
Owner-occupied houses
Housing for rent
Companies’ houses
Housing for sale
5
Figures for October-December 2004 represent OctoberNote :November average.
Source : Ministry of Land, Infrastructure and Transport,“Building Construction Started.”

Note :
Source :(%, % points)

300

Year-on-year change in construction starts forowner-occupied houses

Increase

20

04(CY quarterly basis)

Figures for October-December 2004 represent OctoberNovember average.
Ministry of Land, Infrastructure and Transport,“Building Construction Started.”

Figure 2-28. Trend of Residential Land
PricesFigure 2-27. Year-on-Year Change in Construction
Starts for Owner-Occupied Houses and Diffusion
Index of Orders Received
40

03(3/2000 = 100)All Japan
Six major cities

200

0
-20

100

-40
Diffusion index of orders received for singledwelling, custom-built houses-60(CY quarterly basis)

Decrease

-80
97

98

99

00

01

02

03

04

90

05

Note :The diffusion index figures for October-December 2004
and January-March 2005 represent estimates in a survey
conducted in September 2004.
Sources : Ministry of Land, Infrastructure and Transport, “New
Dwellings Started”; Government Housing Loan Corporation,“National Housing Market Survey.”

Figure 2-29. Trends in Government Housing
Loan Corporation Lending Rate
6(semestral basis)

0
92

94

98

00

02

04

Notes :

1. “Six major cities” refers to the Tokyo Ward area,
Yokohama, Nagoya, Kyoto, Osaka and Kobe.
2. Values are as at the end of March and September.
Source : Japan Real Estate Institute, “Urban Land
Price Index.”Figure 2-30. Outline of Mortgage Loan Tax Break(%)

Maximum
outstanding
amount covered

5

Applicable
year
th

1.00%

st

th

1.00%

9 and 10 year

st

th

1.00%

8 -10 year

st

th

1.00%

7 -10 year

st

th

1.00%

2004

¥50 million

1 -10 year

¥40 million

1 -8 year3

2006¥30 million

1 -7 year2

2007¥25 million

1 -6 year

1

2008¥20 million(monthly basis)

0

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
Notes :

1. Basic interest rate on personal loans.
2. Values are as at the end of each month.
Source : Government Housing Loan Corporation.

Development Bank of Japan Research Report/ No. 51

Note :
Source :Deduction
Deduction
Applicable year
rate
rate

st

2005

4

32

96

1 -6 year

Total¥5 million

th

th

0.50%

¥3.6 million¥2.55 million

th

th

0.50%

th

th

0.50%

¥2 million

th

th

0.50%

¥1.6 million

7 -10 year

Deduction is applicable to those who have moved into the newhouses before the end of each year.
Ministry of Finance.

Constant Decline in Public Investment due to Financial Squeeze
Figure 2-31. Public Investment andGovernment Consumption

Figure 2-32. Trend of Contract Value for
Public Works(change on previous year, %)(As % of GDP)

20

Government final consumption

15
10
5

Public fixed capital formation

0(CY quarterly basis)

25
20
15
10
5
0
-5
-10
-15
-20

CentralOthers(quarterly basis)(FY)

91 92 93 94 95 96 97 98 99 00 01 02 03 04

919293 94 9596 9798 99 00 01 0203

Notes : 1.
2.

Note :

Data represent seasonally adjusted annual rate.
Public fixed capital formation includes general
government, plant and equipment of public
corporations and public dwellings.
Source : Cabinet Office, “National Accounts.”

Source :Figure 2-33. Long-term Outstanding Debts
of Central and Local Governments
800
700
600
500
400
300
200
100
0
-100

(¥ trillion)

Local
Total

02 03

04

In the legend, “Local” represents the total of prefecturesand municipalities. “Others” represent the total ofcentral and local public business entities.
East Japan Construction Surety and other, “Public Works
Prepayment Surety Statistics.”

Figure 2-34. International Comparison of
Public Investment: Public Fixed Capital
Formation (as % of GDP)
(%)

7
6

Japan

5
4

France

3

U.S.

2
1
(FY)

91 92 93 94 95 96 97 98 99 00 01 02 03 04

U.K.

0
92

Duplication
Debts of local governments
Debts of central government
Excluding special account for postal services and postal savings
Total

93

94

95

96

97

98

99

Germany

(CY)

00

02

01

03

Note :

Public fixed capital formation includes general government
only.
Sources : OECD, “General Government Accounts Vol. IV”; Cabinet
Office, “National Accounts.”

Notes :

1. Figures for fiscal 2003 represent estimates after
supplementary budget and those for fiscal 2004 areestimates based on the initial budget.
2. The special account for postal services and postal
savings (outstanding debts of some ¥49 trillion asat the end of FY2002) was abolished at the end of
FY2002.
Sources : Ministry of Finance, “Budgetary Data (August 2004),”other.

Figure 2-35. International Comparison of Financial Situations
200
175

(%)
(1) General government debts / Nominal GDP

Forecast

10(%)
Euro area

5

150
Japan

125

U.S.

0

Euro area

100

U.S.

-5

75

Forecast(2) Primary balance / Nominal GDP

Japan

-10

50
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06
Notes :

Source :(CY)

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

1. Values for 2004-2006 are estimates.
2. Figures for some European countries in 2000 include income from the selling of cellular phone licenses (around 1% of the
primary balance).
OECD, “OECD Economic Outlook December/2004.”

Development Bank of Japan Research Report/ No. 51

33

Exports Level Off, Current Account Surplus Shrinks
Figure 2-37. Export and Import Quantum

Figure 2-36. Trends in Foreign Exchange Rate
100

(¥/$)

(2000=100)
Yen/dollar rate

110
120

(2000=100)

110
100
90

Currency
appreciation

130

80

140

Real effective exchange
rate of yen (right scale) (monthly basis)

150
99

00

01

02

03

70
60

120
115
110
105
100
95
90
85
80

04

(change on previous year, %)

15
10
5
0
-5
-10

(CY quarterly basis)

-15
00

01

China
EU

02

03

Asia
Others

10
8
6
4
2
0
-2
-4
-6
-8

04

01

02

03

04

(seasonally adjusted change on previous quarter, %)(CY quarterly basis)

98

99

00

01

Capital goods
Consumer goods
全体

U.S.
World

02

03

04

Construction goods
Producer goods

1. Asia excludes China.
2. Figures for October-December 2004 represent OctoberNovember average.
Source : Ministry of Finance, “Trade Statistics.”

Source : Ministry of Economy, Trade and Industry, “Analysis of All
Industrial Activities.”

Figure 2-40. Trade Balance on Customs
Clearance Basis(year-on-year change by component)

Figure 2-41. Current Account Balance(annualized change on previous year, ¥ trillion)

25(annual rate, ¥ trillion)

20

5

15

0

10

-5

5
0

-10
(CY quarterly basis)

-15
99

00

01

02

03

04

Fuel import prices
Import (excluding fuel) prices
Import volume
Export prices
Export volume
Trade balance on customs clearance basis

Note :

Figures for October-December 2004 represent OctoberNovember average.
Source : Ministry of Finance, “Trade Statistics.”

3400

Figure 2-39. Shipments of Industrial Goods
for Export

Notes :

10

(monthly basis)

Source : Ministry of Finance, “Trade Statistics.”

Figure 2-38. Export Value by Region

99

Exports

99

Source : IMF.

20

Imports

Development Bank of Japan Research Report/ No. 51-5(CY quarterly basis)

-10
99

00

01

Trade balance
Income balance
Current account balance

Notes :

02

03

04

Service balance
Current transfers

1. Seasonally adjusted.
2. Figures for October-December 2004 represent OctoberNovember average.
Source : Ministry of Finance; Bank of Japan, “Balance of Payments.”

Exports – Characteristics of the Current Recovery Phase

2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5

(%)

Figure 2-42. Contribution of Net Exports(Exports – Imports) to GDP Growth

(%)

3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0

Q1/83-Q2/85
Q4/86-Q1/91
Q4/93-Q2/97
Q1/99-Q4/00
Q1/02-Q3/04(number of quarters lapsed after economic trough)Figure 2-43. Contribution of Exports
to GDP Growth
Q1/83-Q2/85
Q4/86-Q1/91
Q4/93-Q2/97
Q1/99-Q4/00
Q1/02-Q3/04(number of quarters lapsed after economic trough)0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Notes :

1. Reference series are used for the periods to Q4/93-Q2/97.
2. Values indicate contribution to GDP growth after the economic trough.
Source : Cabinet Office, “Preliminary Estimates of National Expenditure.”

Figure 2-44. Shipments for Export byType of Goods

25

Figure 2-45. Value of Exports
by Destination(contribution, %)(contribution, %)

10
NIEs

Producer goods

820

Investment goods

15

China

Other
Asia

6

Consumer goods

4

10
2
5

0

0

-2

-5

-4

U.S.
Q4/93-Q2/97

Q1/83-Q2/85 Q4/86-Q1/91 Q4/93-Q2/97 Q1/99-Q4/00 Q1/02-Q3/04
Source : Ministry of Economy, Industry and Trade, “Analysis of
All Industrial Activities.”

Source :Q1/99-Q4/00

Q1/02-Q3/04

Ministry of Finance, “Trade Statistics.”

Figure 2-46. Impact of U.S. on Japanese Exports
Estimation formula: logEX-logEX(-1)=α+β*(logUSI-logUSI(-1))+γ*(logJPY-logJPY(-1))

Estimation period
Q1/80-Q3/04(
Q1/80-Q2/85
Q2/85-Q1/91
Q1/91-Q2/97
Q2/97-Q4/00
Q4/00-Q3/04

(
(
(
(
(

β
0.50
3.51 )
0.48
1.84 )
0.33
0.68 )
0.78
2.00 )
1.36
0.98 )
1.09
5.65 )

γ-0.20( -2.51 )-0.15( -0.64 )-0.19( -1.25 )-0.16( -1.21 )0.17( 0.80 )-0.21( -1.18 )DW
R2-adj
1.70
0.13
1.77

0.02

2.62

-0.09

2.40

0.12 Notes :

1.85
2.43

1. Volume of Japanese exports: EX
Real U.S. imports: USI
0.04
Nominal effective yen rate: JPY
2. Almon lag is adopted for each explanatory variable.
0.90 Sources : Ministry of Finance, “Trade Statistics”; U.S.
Department of Commerce; IMF.

Development Bank of Japan Research Report/ No. 51

35

Upward Pressure on Corporate and Consumer Prices to be Checked as
Crude Oil Prices Stabilize
Figure 2-47. Trends in Corporate Goods Prices(domestic demand products)
6(%)

Figure 2-48. Trends in Corporate Service
Prices
1

4

(%)

0

2

-1

0

-2

-2

(CY quarterly basis)

-4
01

02

03

(CY quarterly basis)

-3
01

04

EnergyMachineryIron/steel and building materials
Foodstuffs

Non ferrous metals
Chemicals and plastics

Corporate goods prices

02

03

04

Transportation (overseas factor)
Real estate services

Transportation (domestic factor)
Leasing and rental

Other services
Information services

Finance and insurance
Communications and broadcasting services

Advertising services

All items (excluding overseas factor)

Figure 2-49. Trends in Consumer Prices (excluding fresh food)
Goods

(%)

2
1
0
-1
-2
-3

01

02

03

0.6
0.4
0.2
0.0
-0.2
(CY quarterly basis) -0.4
-0.6
04Services(%)(CY quarterly basis)

01

02

03

04

Food (excluding fresh food)

Food products

Public Service

Rent

TextilesPetroleum products

Other personal services

Eating out

Other industrial products

Total

Total

Figure 2-50. Trends in NY Crude Oil Trading (Futures) and WTI
80
60
40
20
0
-20
-40

(%)

(%)

(monthly basis)

00

01

02
Speculative

Notes :

Sources :36

03Commercial

150
100
50
0
-50
-100

04
WTI (right scale)

1. In Figure 2-47, “Machinery” includes electrical machinery & equipment, general machinery & equipment, precision instruments and transportation equipment.
“Iron/steel and building materials” includes iron & steel, metal products, ceramic, stone & clay products, lumber & wood products and scrap & waste. “Energy”
includes electric power, gas & water, petroleum & coal products and minerals. “Others” includes agriculture, forestry & fishery products; processed foodstuffs;
other manufacturing industry products; pulp, paper & related products; and textile products.
2. In Figure 2-48, “Transportation (overseas factor)” includes ocean freight transportation, international air freight transportation and international air passenger
transportation. Due to revision to the statistics system, the present report adopts a corporate service price index (2000 as reference year).
3. In Figure 2-49, data for October-December 2004 represent October-November average.
4. In Figure 2-49, “Other personal services” includes publications. “Public services” includes electricity, gas and water charges. “Rent” includes privatehouse rent and imputed rent.
5. In Figure 2-50, the bars indicate year-on-year change in the number of open interests in crude oil (contracts of 1,000 barrels as at the end of the month) held bytraders (commercial and speculative) participating in the futures market. “Speculative” and “Commercial” contracts are defined as follows:“Speculative” = non-commercial positions + non-reportable positions.
“Commercial” = commercial positions.
Total open interests are distributed among reportable and non-reportable traders. Of the reportable traders, those involved in petroleum refining and related
businesses are defined as holding commercial positions. Other reportable traders hold non-commercial positions. Many of the non-reportable traders are assumed
to be speculators.
6. Growth indicates change on previous year.
Bank of Japan, “Price Indexes Monthly”; Ministry of Internal Affairs and Communications, “Monthly Report on Consumer Price Index”(Figures 2-47 though 2-49); Commodity Futures Trading Commission (CFTC) (Figure 2-50 only).

Development Bank of Japan Research Report/ No. 51

Easy Money Policy Continues
Figure 2-51. Monetary Base and Money Stock(change on previous year, %)

35
30
25
20
15
10
5
0
-5

Monetary base
Money stock (M2+CDs)(CY quarterly basis)

97

98

Source :

99

00

01

02

03

Figure 2-52. Loans and Discounts
Adjusted for Special Items(change on previous year, %)

3
2
1
0
-1
-2
-3
-4
-5
-6
-7

04

Private bank loans
After adjustments for extraordinary factors(monthly basis)

97

Bank of Japan, “Financial and Economic Statistics Monthly.”

99

00

01

02

03

04

Note :

Adjustments for extraordinary factors include adjustments forfluctuation caused by the mobilization or amortization of
credited loans.
Source : Bank of Japan, “Financial and Economic Statistics
Monthly.”

Figure 2-53. Selected Interest Rates
2.0

98

Figure 2-54. Diffusion Index of Lending Attitudeof Financial Institutions

(%)

40

(“accommodative” – “severe,” % points)

30
1.5

20
10

1.0

0
-10

0.5
(Three-month moving average)

0.0(CY quarterly basis)

-30
00

15

-20

01

02

03

04

97

Inter-bank overnight lending rate
Three-month CDs
Yield on 10-year government bonds
Average contracted interest rate on new loans

98

99

00

01

02

03

04

Large-sized corporations
SMEs

The diffusion index of lending attitude of financial
institutions has a discontinuity due to a revision to its
coverage in March 2004.
Source : Bank of Japan, “Short-term Economic Survey ofEnterprises in Japan” (Tankan ).

Notes :

Average contracted interest rate on new loans is based onmonthly statistics. Others represent the monthly averagesof daily closing prices.
Sources : Nihon Keizai Shimbun; Bank of Japan, “Financial andEconomic Statistics Monthly.”

Note :

Figure 2-55. Change in Deposits by Component(city banks, first- and second-tier regional banks)

Figure 2-56. Introduction of Payment andSettlement Deposits by Financial Institutions(change on previous year, %)Demand deposits
Time and savings deposits
Total deposits

10

Financial institutions
covered

Under
Already
introduced consideration or in Total (%)
preparation (%)
(%)

5

Banks

31.8

63.6

95.5

0

Credit associations

72.4

27.6

100.0

Credit unions

19.6

72.1

91.6

Labor credit associations

0.0

100.0

100.0

Total

47.2

49.4

96.6

-5
(CY quarterly basis)

-10
98

99

00

01

02

03

04

Source : Bank of Japan, “Monthly Report of Recent Economic andFinancial Developments.”

Source : Financial Service Agency, “Preparation of Financial
Institutions for the Introduction of Payment and Settlement
Deposits (as of December 2004).”

Development Bank of Japan Research Report/ No. 51

37

Trends in Non-lending Finance
Figure 2-58. Issues of BBB and Lower-rated
Domestic Industrial Debentures

Figure 2-57. Straight Bond Yields(spreads over government bond distribution rate)
80

(bps)

25
A rating
AA rating
AAA rating

70
60

2,700

BBB+
BBBBBB
Value (right scale)20

50(¥100 trillion)(number)

2,100

15
1,500

40
10

30
20

900

5

10
0

0
1
03

3

5

7

9

11

1
04

3

5

7

9

(Monthly basis)

Source : Japan Securities Dealers Association (Thomson Deal
Watch for individual bond yields).

(¥ trillion)

I
02

II

III

IV

I
03

II

III

IV

II

III

IV

I
04

II III IV(CY quarterly basis)(%)
Contract amountUtilization rate (right scale)

2.5
2.0
1.5
1.0
0.5
0.0

II

III IV I
02II

III IV I
03II

III IVI II III04(CY quarterly basis)

Figure 2-62. Credit Derivatives Outstanding(US$ billion)

30
25

4

20

3

15

2

10

1

5

0

0
4-6/03

7-9

10-12

1-3/044-6
7-9(CY quarterly basis)

Source : Bank of Japan, “Monthly Report of Recent Economic andFinancial Developments.”

38

Development Bank of Japan Research Report/ No. 51

3.0

Data cover five categories of banks: city banks, long-term credit
banks, credit banks, first-tier regional banks and second-tierregional banks.
Source : Bank of Japan.

35

Public/listed companies
Nonpublic companies

5

I
03

Note :

Figure 2-61. Loans Syndicated(¥ trillion)IV(¥ trillion)

I
02

I
II
III Oct.04
Nov.
(CY quarterly basis)

Note :
Total of domestic and overseas financing.
Source : Japan Securities Dealers Association.

6

III

Figure 2-60. Commitment Lines Outstanding
22
20
18
16
14
12
10
8
6
4
2
0

Capital increase by public offering
CB
WB
Initial public offering

II

Source : Nomura Securities Co., Ltd.

Figure 2-59. Value of Equity Financing
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0

300
I
02

11

End 12/01 End 6/02 End 12/02 End 6/03 End 12/03 End 6/04
Note :
Source :Credit derivatives are mostly intended to transfer default risks.
Bank of Japan, “Monthly Report of Recent Economic andFinancial Developments.”

List of Back Numbers (Including JDB Research Report)
No. 51 Recent Trends in the Japanese Economy: Pause in Recovery (this issue)
No. 50 Corporate Capital Spending Behavior and Innovation Efforts: Findings of Survey on Capital Spending
Behavior (Conducted in November 2004), March 2005
No. 49 Survey on Planned Capital Spending for Fiscal Years 2004 and 2005 (Conducted in November 2004),
January 2005
No. 48 Recent Trends in the Japanese Economy: Medium-term Outlook of Japanese Industrial Structure, January 2005
No. 47 Survey on Planned Capital Spending for Fiscal Years 2003, 2004 and 2005 (Conducted in June 2004),
September 2004
No. 46 Recent Trends in the Japanese Economy: Impact of Rising International Commodity Prices on Corporate Input/Output Behavior, September 2004
No. 45 How Life Cycle Assessment (LCA) Can Enhance the Fight against Global Warming, August 2004
No. 44 Recent Trends in the Japanese Economy: A Medium-term Scenario for the Japanese Economy with
Special Focus on the Flow of Funds and Finance, March 2004
No. 43 Survey on Planned Capital Spending for Fiscal Years 2002, 2003 and 2004 (Conducted in August 2003),
November 2003
No. 42 Promoting Corporate Measures to Combat Global Warming: An Analysis of Innovative Activities in the
Field, September 2003
No. 41 Prospects and Challenges for End-of-Life Vehicle Recycling, May 2003
No. 40 Survey on Planned Capital Spending for Fiscal Years 2002 and 2003 (Conducted in February 2003),
May 2003
No. 39 China’s Economic Development and the Role of Foreign-Funded Enterprises, May 2003
No. 38 Decline in Productivity in Japan and Disparities Between Firms in the 1990s: An Empirical Approach
Based on Data Envelopment Analysis, April 2003
No. 37 Trends in Socially Responsible Investment: Corporate Social Responsibility in a New Phase, March
2003
No. 36 Recent Trends in the Japanese Economy: A Medium-term Scenario for the Sustainability of the Japanese Economy, February 2003
No. 35 Concerns for the Future and Generational Consumption Behavior, February 2003
No. 34 Prospects and Challenges Surrounding Japan’s Electrical Equipment Industry: General Electrical
Equipment Manufacturers’ Restructuring of Operations and Future Prospects, November 2002
No. 33 Survey on Planned Capital Spending for Fiscal Years 2001, 2002 and 2003 (Conducted in August 2002),
November 2002
No. 32 Behavior Trends of Japanese Banks toward the Corporate Sector and Their Impact on the Economy,
October 2002
No. 31 Microstructure of Investment and Employment Dynamics: Stylized Facts of Factor Adjustment Basedon Listed Company Data, October 2002
No. 30 Recent Trends in the Japanese Economy: Globalization and the Japanese Economy, August 2002
No. 29 Corporate Financing Trends in Recent Years: Fund Shortages and Repayment Burden, August 2002
No. 28 Urban Renewal and Resource Recycling: For the Creation of a Resource Recycling Society, July 2002
No. 27 Labor’s Share and the Adjustment of Wages and Employment, June 2002

No. 26 Survey on Planned Capital Spending for Fiscal Years 2001 and 2002 (Conducted in February 2002),
May 2002
No. 25 Environmental Information Policy and Utilization of Information Technology: Toward a Shift in Environmental Policy Paradigm, March 2002
No. 24 The Changing Structure of Trade in Japan and Its Impact: With the Focus on Trade in Information
Technology (IT) Goods, March 2002
No. 23 Microstructure of persistent ROA decline in the Japanese corporate sector: Inter-company disparities
and investment strategies, March 2002
No. 22 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation and Prospects ofEvolution, February 2002
No. 21 Survey on Planned Capital Spending for Fiscal Years 2000, 2001 and 2002, December 2001
No. 20 Current Situation and Challenges for Cable Television in the Broadband Era, October 2001
No. 19 Recent Trends in the Japanese Economy: The Japanese Economy under Deflation, August 2001
No. 18 Introduction of a Home Appliance Recycling System: Effects & Prospects: Progress towards Utilisationof Recycling Infrastructure, June 2001
No. 17 Survey on Planned Capital Spending for Fiscal Years 2000 and 2001, June 2001
No. 16 Revitalization of Middle-aged and Elderly Workers in Japan’s Labor Markets: Requiring the Expansionof the Vocational Training Functions, March 2001
No. 15 Risk-Averting Portfolio Trends of Japanese Households, March 2001
No. 14 Consumption Demand Trends and the Structure of Supply: Focus on Retail Industry Supply Behavior,
March 2001
No. 13 Recent Trends in the Japanese Economy: Weakness of Current Economic Recovery and Its Background,
March 2001
No. 12 Empirical Reassessment of Japanese Corporate Investment Behavior: Features and Changes since the1980s, based on Micro-level Panel Data, March 2001
No. 11 Survey on Planned Capital Spending for Fiscal Years 1999, 2000 and 2001, October 2000
No. 10 Job Creation and Job Destruction in Japan, 1978-1998: An Empirical Analysis Based on EnterpriseData, September 2000
No. 9

Recent Trends in the Japanese Economy: Information Technology and the Economy, September 2000

No. 8

Trend of International Reorganization Affecting the Japanese Automobile and Auto Parts Industries,
June 2000

No. 7

Survey on Planned Capital Spending for Fiscal Years 1999 and 2000, June 2000

No. 6

Current Status and Future Perspective of the Japanese Remediation Industry: Technology and Market
for Underground Remediation, May 2000

No. 5

Recent Trends in the Japanese Economy: The 1990s in Retrospect, March 2000

No. 4

Destabilized Consumption and the Post-bubble Consumer Environment, February 2000

No. 3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations, theDebt Burden and Other Structural Factors, January 2000

No. 2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No. 1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other AsianCountries, November 1999

JDB Research Report
No. 96 Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999
No. 95 Efforts to Protect the Natural Environment in the United States and Germany: Environmental Mitigation and Biotope Conservation, July 1999
No. 94 Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999
No. 93 Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO sector
through comparison with Germany, June 1999
No. 92 The Impact of Demographic Changes on Consumption and Savings, March 1999
No. 91 Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March 1999
No. 90 Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999
No. 89 Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japan and the U.S., December 1998
No. 88 Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998
No. 87 Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998
No. 86 Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998
No. 85 Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998
No. 84 R&D Stock and Trade Structure in Japan, August 1998
No. 83 Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998
No. 82 The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Acceptanceis Essential, May 1998
No. 81 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and1998 Conducted in August 1997, March 1998
No. 80 Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998
No. 79 Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January 1998
No. 78 Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series and Environmental Cost, January 1998
No. 77 Current Conditions and Issues of Computerization in the Health Care Industry: For the Construction of
a Health Care Information Network, January 1998
No. 76 Household Consumption and Saving in Japan, December 1997
No. 75 The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to Support
Diverse Consumer Choices, November 1997
No. 74 Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International
Trade, October 1997
No. 73 The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the Effects on Productivity and Employment, October 1997
No. 72 An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997
No. 71 Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of Economic Recovery, August 1997
No. 70 Corporate Fundraising: An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997

Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm Data
from Japan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of theElectric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key, October 1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of the Current Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the UnitedStates and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996
No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and1996 Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October 1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part 2, July 1995
No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery Industry, June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level,
May 1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and1995 Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration, December
1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and1994 Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and1993 Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February
1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and1992 Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and1991 Conducted in August 1990, September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990
No. 18 Petrochemicals in Japan, The US, and Korea an Assessment of Economic Efficiency, February 1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and1990 Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing
Economies, August 1989

No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years 1988
and 1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and1989 Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987