Section 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

141

Section 3
The Kansai Economy:
Recent Developments and Short-Term Forecasts
IRIE, Hiroaki; INADA, Yoshihisa

Consumer Sentiment
The FY 2022 Consumer Confidence Index was 31.6, down 4.4 points from theprevious year, marking the first deterioration in two years (Figure 2-3-1).
Although the level was higher than in FY 2020 (29.7), when the COVID-19 pandemic began, sentiment deteriorated as the number of new positives increasedin the 6th and 7th waves. However, it subsequently began to recover, mainly due
to the government’s emphasis on maintaining economic and social activities andnot imposing behavioral restrictions; it reached 38.3 in May 2023, the highest
level since the COVID-19 pandemic, but has remained weak and sluggish eversince.

Part Ⅱ
Part Ⅲ(1) Household sector
The household sector in the Kansai region picked up moderately in FY 2022.
Sentiment, large retail sales, the employment environment, and the housing market all held up well, partly due to more relaxed action restrictions on
the COVID-19 infection expansion compared to the previous year. However,households were faced with higher consumer prices for a wide range of items,
particularly food and energy. As a result, real wages continued to deteriorate. In
FY 2023, the gradual recovery continued, but growth remained sluggish due to
weak trends in income and employment conditions and sentiment.

Part ⅣIn FY 2022, the Kansai economy generally picked up as socioeconomic activities
normalized, and although the number of new COVID-19 infections reached thesixth and seventh waves during FY 2022, no emergency declarations or otherstrict behavioral restrictions were imposed. In May 2023, the handling of COVID19 was shifted to category 5, and economic and social activities have returned tonormal and become more active. FY 2023 also saw a continued pickup, but thepace of recovery was slow, and some signs of deterioration were evident.
Below is a sector-by-sector retrospective of the Kansai economy in FY 2022
and beyond, focusing on monthly economic indicators.

Part Ⅰ

1. Retrospective of the Kansai economy in FY 2022 andthe first half of FY 2023

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Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook
45
40
35
30
25
20

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Figure 2-3-1

Consumer Confidence Index

Source: Cabinet Office, “Survey of Consumption Trends”

Income environment
The income environment continued to show steady growth in nominal terms but
continued to decline in real terms due to high prices (Figure 2-3-2), with grossnominal wages in Kansai in FY 2022 (APIR estimate) averaging JPY 318,361 permonth. This was an increase of 2.2% YoY, marking the second consecutive yearof year-on-year growth. Real wages (i.e. excluding the effect of price fluctuations
based on the consumer price index) were down 1.4% from the previous year.
The Kansai region is also facing rising consumer prices, and wage growth is notkeeping pace with the growth in prices.

（%）
5
4

Gross nominal wages
Real wages

3
2
1
0
-1
-2
-3

Figure 2-3-2

M07

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19M01

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-5

M04

-4

Gross Nominal Wages and Real Wages (% change from the samemonth of the previous year)

Source: Ministry of Health, Labour and Welfare, “Monthly Labor Survey,” etc.

Part Ⅳ

Large retailers’ sales
Large- retailers’ sales recovered due in part to a recovery in customer traffic andhigher prices (Figure 2-3-4). The overall sales of large retailers in the Kansai
region in FY 2022 totaling JPY 3,744.8 billion, up 7.2%, the second consecutive
year of YoY growth and above the FY 2019 level. The growth is higher than thatof the nation as a whole (+4.5% YoY).
Therein, department store sales (on an all-store basis) totaled JPY 1,429.8
billion, up 20.5% from the previous year, marking the second consecutive yearof year-on-year growth, and have been recovering steadily since 2023 on theback of a recovery in customer traffic. In addition, supermarket sales totaled
JPY 2,307.4 billion. YoY, sales increased for the first time in seven years, up 0.3%.

1.8
1.6
1.4
1.2
1.0

Kansai
Japan

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Figure 2-3-3Part Ⅱ

Employment environment
The employment environment picked up as socioeconomic activities normalized(Figure 2-3-3), and the ratio of job offers to applicants in the Kansai region
in FY 2022 was 1.19, up 0.11 points from the previous year, marking the first
improvement in two years. The national ratio for FY 2022 was 1.31. On a monthly
basis, the Kansai region had been improving for 14 consecutive months sinceNovember 2021, but since the beginning of 2023, the number of job openings
has remained almost unchanged. While job openings in the accommodation/
restaurant and retail sectors are increasing, those in the manufacturing and construction sectors, which are facing cost increases, are being held down, with thetrend differing somewhat by industry sector.

Part Ⅰ

143

Part Ⅲ

Section 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

Effective Job Openings to Applicants Ratio (Seasonally Adjusted)

Source: Ministry of Health, Labour and Welfare, “General Job Placement Situation”

144

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook（%）
30
Kansai
Japan

20
10
0
-10

Figure 2-3-4

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-30

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Department store and supermarket sales (YoY: %)Note: Based on all storesSource: Kansai Bureau of Economy, Trade and Industry, “Department Store and Supermarket Sales”(2) Corporate Sector
In FY 2022, the corporate sector in the Kansai region showed different trends
among industries. In the manufacturing sector, both production and business
confidence were weak due to soaring raw material prices and a slowdown inoverseas economies. On the other hand, the non-manufacturing sector generally
recovered with the resumption of economic activity, especially in face-to-faceservices such as lodging, food services, and retail.
Business confidence
According to the Bank of Japan’s Osaka Branch Tankan survey, the Diffusion
Index (DI) for business conditions in Kansai (firms of all sizes in all industries)
was positive for the eighth consecutive quarter as of the December 2023 survey(Figure 2-3-5). Compared to the nation as a whole, there is no significant difference. By industry, the manufacturing sector has been in and out of the vicinityof zero since 2022. The non-manufacturing sector recovered steadily, especiallyin face-to-face services.
Industrial production
The production index has been sluggish due to the global shortage of semiconductors and soaring raw material prices (Figure 2-3-6). The production index
for FY 2022 was 93.5 (2015=100, seasonally adjusted). This was -2.2% from theprevious year, the first decline in production in two years. The trend is similar
to the national level. The electronic components/devices industry, ceramic/soilSection 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

145

Forecast
10
0
-10
-20
Kansai-30

DI for business conditions in the Bank of Japan’s Tankan survey(all sizes, all industries)

Figure 2-3-5Note: * denotes that it is a forecast.
Source: Bank of Japan, Osaka Branch, “Tankan: Short-term Economic Survey of Enterprises”

Part Ⅰ

Q4
*24Q1

23Q1

22Q1

21Q1

20Q1

19Q1

Japan
18Q1

-40

120

Part Ⅱ

115
110
105
100
95
85
80

Kansai (2015=100)
Japan (2020=100)

Figure 2-3-6

Indices of Industrial Production (seasonally adjusted)

Source: Kansai Bureau of Economy, Trade and Industry, “Kansai Region Industrial Production Trends”

and stone products industry, and plastic products industry contributed to theoverall decline in production, which has continued to fluctuate since 2023.
Capital investment
According to the Bank of Japan’s December 2023 Tankan survey, capital investment by companies in the Kansai region in FY 2022 (all sizes and all industries)
was up 8.7% from the previous year (Table 2-3-1). Growth was high, especiallyin the manufacturing sector. The planned investment in FY 2023 is +6.0% overthe previous year, which is a modest increase compared to the previous year’s
growth, but still shows an aggressive stance.

Part Ⅳ

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Part Ⅲ90

146

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

Table 2-3-1

BOJ Tankan: Planned Capital Investment
Kansai

All industries

ManufacturingJapan
Non-manufacturing

All industries

ManufacturingNon-manufacturing

FY 2022

8.7

14.4

5.1

9.2

9.0

9.3

FY 2023

6.0

7.0

5.4

12.8

14.6

11.7

Source: Bank of Japan, Osaka Branch, “Tankan: Short-term Economic Survey of Enterprises (Kansai Region)”(3) External Sector
For the external sector, we focus on trade in goods and exports of services(inbound tourism demand). Both exports and imports of goods increased forthe second consecutive year. As for exports of services, a remarkable recovery
was seen as a result of the increase in the number of foreign visitors to Japanfollowing the substantial easing of waterfront measures such as the removal of
the cap on the number of people entering Japan.
Trade in goods
Both imports and exports in FY 2022 set new FY records for the second year
in a row (Figure 2-3-7). The price changes for both imports and exports weresignificant due to rising resource prices and the depreciation of the yen. Exports
totaled JPY 21,729.1 billion, up 13.0% from the previous year, marking the second
consecutive year of growth. Mineral fuels and steel contributed to the increase.
However, this growth was modest compared to that in exports for the nation asa whole (+15.5% YoY). Exports to China were higher in the Kansai region thanin the nation as a whole, and the impact of the zero-COVID policy is thought to(%)
50

Trade balance: right axis

Kansai's exports

Kansai's import(JPY billion)
1,000
800

30

600

20

400

10

200

0

0

-10

-200

-20

-400

-30

-600

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40

Figure 2-3-7

Exports, imports, and trade balance

Source: Osaka Customs, “The Summary Report on Trade of Kansai”

(%)
80
60

US

EU

China

40
20
0
-20
-40

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Figure 2-3-8

Exports by region (YoY)

Source: Osaka Customs, “The Summary Report on Trade of Kansai”

Part Ⅱ

Inbound tourism demand
A remarkable recovery was seen in the number of international visitors to Japandue to the significant relaxation of border control measures, including theremoval of the cap on the number of visitors to Japan.
According to the Ministry of Justice, the number of international visitors
to Japan in FY 2022 was 9,029,000 nationwide, of which 2,042,000 entered Japan
from Kansai International Airport (Figure 2-3-9). Since October 2022, thenumber of international visitors to Japan have increased rapidly due to the significant relaxation of the COVID-19 border control measures by the Japanese
government. The number of visitors reached 656,000 in October 2023, surpassing for the first time the level of the same month in 2019 (652,000), the month
before the COVID-19 pandemic.

Part Ⅲ

have had a large impact. Exports to the U.S., the EU, and China respectively
increased YoY by 29.4%, 16.1%, and 4.0% (Figure 2-3-8). While exports to
Europe and the U.S. were relatively firm, those to China gradually declined dueto the impact of the zero-COVID policy lockdown. Since FY 2023, the trend has
been weak due to the contraction of world trade.
Imports totaled JPY 20,958.7 billion, up 26.2% YoY, marking the second consecutive year of year-on-year increase, as did exports. Crude oil, natural gas, andmanufactured gas increased, and imports have been declining since the second
half of FY 2022, as the sharp rise in crude oil prices has subsided.
The trade balance was +JPY 771 billion, the eighth consecutive year of surplus, but the surplus was smaller than that of the previous year (+JPY 2.6 trillion).

Part Ⅰ

147

Part Ⅳ

Section 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

148

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook(persons)
800,000
655,571
600,000

400,000

200,000

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0

Number of foreign visitors to Japan via Kansai International
AirportFigure 2-3-9

Source: Ministry of Justice, “Immigration Statistics”

Department store duty-free sales also continue to pick up (Figure 2-3-10).
According to the Osaka branch of the Bank of Japan, duty-free sales at department stores in the Kansai region almost tripled in FY 2022, up 201.8% from theprevious year. The depreciation of the yen boosted sales of cosmetics and highend products, etc. Duty-free sales exceeded the same month in 2019, which
was before the COVID-19 pandemic, in June 2023, and reached a record single
month in October of the same year.
(4) Public sector
The public sector (public works) in the Kansai region remained steady compared to the nation as a whole.
(13/04=100)
2,000

1,772.0

1,800
1,600
1,400

1,419.6

1,200
1,000
800
600
400
200
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0

Figure 2-3-10

Department store duty-free sales (April 2013=100)

Source: Bank of Japan, Osaka Branch, “Department Store Duty Free Sales (Kansai Region)”

Section 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

149

(%)

20

KansaiJapan

Part Ⅱ

30

Part ⅠIn FY 2022, the value of the completed public works in the Kansai region
totaled JPY 3,016.5 billion, a YoY increase of 9.4% (Figure 2-3-11). This is the
fourth consecutive year of YoY increase since FY 2019, when retroactive data
became available. On a monthly basis, the Kansai region posted year-on-year
growth for 21 consecutive months from July 2021 to March 2023. Large-scale
public investment projects, such as the development of land on Yumeshima, thesite of the Osaka-Kansai Expo, the Shinmeishin Expressway, and the Yodogawa
Left Bank Route, have been progressing, and in FY 2023, the region continued
to show steady growth, exceeding the previous year’s level. The value of completed public works in nationwide was JPY 21,783.7, an increase of 1.1% YoY.

10
0

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-20

Public works output (YoY)

Source: Ministry of Land, Infrastructure, Transport and Tourism, “General Construction Statistics”

2. Kansai Economic Forecast: FY 2023-25
The forecast of the Kansai economy for FY 2023-25, reflecting the latest economic
indicators in and out of the Kansai region, including the second preliminary
GDP report for Q3 2023, and the forecast results of the Japanese economy.
(1) Kansai GRP growth forecast: FY 2023 +1.3%, FY 2024 +1.6%,
FY 2025 +1.4%.
We forecast that Kansai’s real GRP growth will be +1.3% in FY 2023, +1.6% in FY
2024, and +1.4% in FY 2025 (Table 2-3-2, Figure 2-3-12). Actual forecasts forpast years are +2.5% for FY 2021 and +1.4% for FY 2022, with moderate growthin the 1% range from FY 2022 onward, recovering to pre-COVID-19 pandemic
levels in FY 2023.

Part Ⅳ

Figure 2-3-11

Part Ⅲ-10

150

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

Table 2-3-2

Results Table of Kansai Economic Forecast
FY

2021

2022

2023

2024

2025

1.6

2.6

0.4

1.1

0.8

▲ 1.5

3.6

1.2

0.1

1.3

Private non-residential capital investment

1.2

1.6

2.1

2.3

2.8

Government final consumption expenditure

3.0

1.1

0.7

0.3

0.4

▲ 1.5

0.8

4.0

2.9

2.4

Exports

8.4

2.7

0.7

2.1

3.4

Imports

4.1

6.0

0.1

1.3

3.2

Real GRP

2.5

1.4

1.3

1.6

1.4

Private demand (contribution)

1.0

2.1

0.6

1.1

1.0

Public demand (contribution)

0.4

0.2

0.4

0.3

0.2

Net exports (contribution)

1.0

▲ 0.9

0.3

0.2

0.2

Nominal GRP

2.3

2.0

4.3

1.9

2.9

GRP deflator

▲ 0.1

0.5

3.0

0.3

1.4

Consumer Price Index

0.0

2.8

2.8

2.1

1.6

Industrial Production Index

5.2

▲ 2.2

▲ 0.0

1.1

1.6

Unemployment rate

3.0

2.9

3.0

2.9

2.8

Private final consumption expenditure
Private residential investment

Public fixed capital formation

Note: Unit %, except for Unemployment rate, is the growth rate from the previous year; FY 2021-22 is the actual
forecast; FY 2023-25 is the forecast.
Source: Prepared by the author
(%)
3.0

2.5
2.1

2.0

1.0

1.4
1.0

1.1

1.0
0.4

0.6

1.0
0.3 0.2

0.2

2023

2024

2025 FY

0.2

-0.9
2021

Private demand

Figure 2-3-12

1.4

0.4 0.3

0.2

0.0

-1.0

1.6

1.3

2022

Public demand

External demand

GRP growth rate

GRP Forecast Results and Contribution to Growth

Source: Prepared by the author

Let us look at the contribution of each demand item to growth. Private
demand will be the driver of growth with +0.6 %pts in FY 2023, +1.1 %pts in FY
2024, and +1.0 %pts in FY 2025. Public demand will also support growth by +0.4
%pts in FY 2023, +0.3 %pts in FY 2024, and +0.2 %pts in FY 2025. External demandSection 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

151(2) Public sector
The contribution of public demand to real GRP growth is forecast to be +0.4 %pts
（%）
3.0

2.0

2.8

1.5
1.4

1.0

0.0

Figure 2-3-13

Kansai
Japan

2.5

2021

2022

1.7

1.3

2023

1.6

1.4

1.4
1.1

2024

2025

FY

Economic Growth Rates in Kansai and Nationwide

Source: Prepared by the author

Part Ⅱ
Part ⅢPart Ⅳ(2) Forecasts by sector(1) Private sector
The breakdown of the contribution of private demand to GRP growth will be +0.2
%pts in FY 2023, +0.6 %pts in FY 2024, and +0.5 %pts in FY 2025 for the household
sector. The corporate sector will be +0.4 %pts in FY 2023, +0.5 %pts in FY 2024,
and +0.5 %pts in FY 2025.
In the household sector, real private final consumption expenditures is projected to grow by 0.4% in FY 2023, +1.1% in FY 2024, and +0.8% in FY 2025. Realprivate residential investment is projected to increase by 1.2% in FY 2023, +0.1%
in FY 2024, and +1.3% in FY 2025. Both household consumption and housing
investment are expected to recover at a slower pace, due to the thriftiness associated with high prices and sluggish growth in real wages.
Real private capital investment, which accounts for the bulk of the corporate
sector, is forecast to grow by 2.1% in FY 2023, 2.3% in FY 2024, and 2.8% in FY
2025. Private capital investment plans continue to be on the rise, and this willcontinue to support growth in the future.

Part Ⅰ

will be weak, at +0.3 %pts in FY 2023, +0.2 %pts in FY 2024, and +0.2 %pts in FY
2025.
Comparing the Kansai and Japan economic forecasts, the growth rate for
FY 2023 will be lower in Kansai than in the nation as a whole but will be higher
in Kansai in FY 2024-25 (Figure 2-3-13). Private demand and public demand,
especially capital investment, will be stronger than in the nation as a whole.

152

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook

in FY 2023, +0.3 %pts in FY 2024, and +0.2 %pts in FY 2025.
Real Government final consumption expenditure growth is expected to be+0.7% in FY 2023, +0.3% in FY 2024, and +0.4% in FY 2025. And, real public fixed
capital formation is expected to grow by +4.0% in FY 2023, +2.9% in FY 2024, and+2.4% in FY 2025. From FY 2024 onward, public investment growth in the Kansai
region is expected to exceed that of the nation as a whole in preparation for the
hosting of the World Exposition.
(3) External sector
The contribution of extraterrestrial demand to real GRP growth is expected tobe small, at +0.3 %pts in FY 2023, +0.2 %pts in FY 2024, and +0.2 %pts in FY 2025.
Real export growth is projected to be +0.7% in FY 2023, +2.1% in FY 2024,
and +3.4% in FY 2025. The Japanese Economic forecasts export growth of +4.1%
in FY 2023 and +3.8% in FY 2024, which is lower than the Kansai Economic
forecast. Kansai’s exports to China were below the previous year’s level in thefirst half of FY 2023, reflecting the large weight of exports to China in the Kansai
region, which has a large impact, both positive and negative. Real import growthis projected to be +0.1% in FY 2023, +1.3% in FY 2024, and +3.2% in FY 2025,
reflecting current performance and weak domestic demand. As a result, thecontribution of net exports to real GRP growth will be +0.2 %pts in FY 2023, +0.3
%pts in FY 2024, and +0.1 %pts in FY 2025.
The contribution of real domestic net exports is projected to be +0.1 %pts in
FY 2023, -0.1 %pts in FY 2024, and +0.1 %pts in FY 2025.
(4) Employment and income environment
The Unemployment rate is projected to gradually improve to 3.0% in FY 2023,
2.9% in FY 2024, and 2.8% in FY 2025.
Growth in per capita employment income is expected to be moderate, at+1.3% in FY 2023, +1.4% in FY 2024, and +1.9% in FY 2025. Growth in the CPI is
expected to slow gradually, to +2.7% in FY 2023, +2.1% in FY 2024, and +1.5% in
FY 2025. As a result, real wage growth will be -1.5% in FY 2023, -0.7% in FY 2024,
and +0.3% in FY 2025. It will take until FY 2025 for real wages to turn positive.

3. Recovery process from COVID-19 pandemic in Kansai
prefectures: GRP advance estimation
In Japan, official prefectural GRP figures are released about two years later
than the release of the national GDP figure. For that reason, APIR has been
making its own advance estimates of the actual GRPs for the six prefectures in153

Section 3 / The Kansai Economy: Recent Developments and Short-Term Forecasts

103.1

FY 2020

FY 2021

FY 2022

FY 2023100.3 100.4
99.0
97.8
96.5

99.1
98.1

99.8

99.5
98.3
98.0

97.4

97.0 97.2
96.5

95.9 96.1
95.5
95.2

95.4
94.6
93.9

96.3

98.5

96.7
95.6

95.9

93.6
93.4

Shiga

Nara

Wakayama Total (Kansai)

Japan

Recovery process of Kansai prefectures from the COVID-19
pandemic

Source: APIR “Kansai Economic Insight Quarterly,” No. 66

the Kansai region for previous years that have not yet been published.
Figure 2-3-14 shows the change from FY 2020-23 when the FY 2019 GRP
for each prefecture is set at 100.
In FY 2020, when the COVID-19 pandemic began, the largest decrease in
GRP was seen in Wakayama Prefecture (-6.6 points), followed by Kyoto (-6.1
points), Osaka (-4.6 points), Nara (-4.5 points), Hyogo (-3.5 points), and Shiga(-2.6 points). The Kansai region (six prefectures) saw a decline of -4.4 points.
Looking at the next two years, FY 2021-22, when the COVID-19 pandemic
continued, Hyogo, Kyoto, Osaka, and Wakayama prefectures reversed their positive trend. Shiga Prefecture recovered to its pre-COVID-19 level in FY 2021. On
the other hand, unlike other prefectures, Nara Prefecture is not on a recovery
track and has been slow to recover from the COVID-19 pandemic.
FY 2023 is also entering a new phase for each prefecture. Osaka and Kyoto
prefectures will maintain their recovery pace, and Shiga will also maintain its
pre-COVID-19 level. Hyogo and Wakayama prefectures will deteriorate from theprevious year, and recovery from the COVID-19 pandemic will be delayed. Nara
Prefecture has been stagnant since the COVID-19 pandemic and shows little
signs of recovery.
Finally, the contribution of each prefecture to the growth rate of the Kansai
economy in FY 2020-23 is shown in Figure 2-3-15. In FY 2020, under the economic impact of COVID-19, the negative contribution of each Kansai prefecturePart Ⅱ

Figure 2-3-14

Kyoto

Part Ⅲ

Hyogo

Part Ⅳ

Osaka

Part Ⅰ

92.2

154

Chapter 2 / The Economies of Japan and Kansai: A Retrospective and Outlook
(%pt)
2.0

1.2

1.0

1.3

0.3

Wakayama

0.0

Nara

-1.0

Shiga

-2.0

Kyoto

-3.0
-4.0
-5.0

Figure 2-3-15

Hyogo

4.4
-

Osaka
FY 2020
conﬁrmed

FY 2021estimate

FY 2022estimate

FY 2023
forecast

Total(Kansai)

Kansai’s contribution to real growth by prefecture

Source: APIR “Kansai Economic Insight Quarterly,” No. 66

increased significantly, and the real GRP growth rate of the entire Kansai region
was -4.1%, close to the negative growth rate of the nation as a whole. in FY 2021,
the growth rate of the entire Kansai region was +1.2%. In FY 2022, Osaka andKyoto prefectures boosted the growth of the Kansai region, resulting in a real
GDP growth rate of +1.3%, similar to that of the nation as a whole. In FY 2023,
growth in the Kansai region is expected to remain flat, mainly due to a slump in
the manufacturing sector. While Osaka Prefecture will continue to show strong
growth as it did in FY 2021 and FY 2022, all other prefectures will see either
modest or negative growth.