Bank of Japan's June report of recent economic and financial developments in Japan  (Central Bank Articles and Speeches, 16 Jun 98)
Central bank: boj | Type: speech | Date: 1998-06-16

## Bank of Japan's June report of recent economic and financial developments in## Japan BANK OF JAPAN, COMMUNICATION, 16/6/98.## The Bank's View 1Final demand remains weak and production continues to decline in Japan. As consequence, employment and income conditions have recently shown a significant deterioratiWith respect to final demand, public-sector investment seems to have bottomed Growth in net exports, however, has virtually peaked out as exports to other Asian c declined. Business fixed investment continues to be on the decline. Private consumption sh sign of recovery, although the deterioration has slowed. Housing investment has decreased Against the background of weak final demand, inventories have accumulated further and ind production continues to decrease. As a result, corporate profits have worsened, and employ income conditions have deteriorated evidently, as seen recently in the rapid rise unemployment rate.As for the outlook of the economy, the implementation of the supplementary bu for fiscal 1998 is assumed to boost demand through additional public works and special tax-reduction, and cease the negative interactions of production, income, and expenditure. such positive effects of the fiscal policy may be weakened, if the ongoing rapid deter employment and income conditions further dampens the overall economic activities. Therefo overall economic activities, including corporate and household confidence, should be c monitored.With regard to prices, wholesale prices continue to fall and consumer p (excluding the effects of institutional changes) have declined slightly below the previ level. With respect to the factors affecting the outlook, the downward pressure on domes induced by the decline in import prices including overseas commodity prices has already we Also, the expansion in the output gap in the economy is expected to slow in line implementation of the economic stimulus package. However, reflecting the present high inv level and the relatively large output gap, prices are likely to be weak for some time. The be additional downward pressures if domestic demand weakens further.As for financial markets, rates on term instruments (for both spots and futur been generally steady in the money markets. Yields on long-term government bonds reco historical lows from late April to early June with the releases of weak economic indicato recently showing a slight turnaround. Stock prices have been slightly declining, indicatin market sentiment on the economy.Market concern towards credit risk remains strong, and the yield differential bonds issued by the private sector and those by the government has been significant since last year.With respect to monetary aggregates, growth in M2+CDs has been slowing and private bank lending remains sluggish. This reveals the fall in credit demand following economic conditions as well as the continued cautious lending attitudes of private banks.1The Bank's view on recent ec onomic and financial developments, determined by the Policy Board at the Monetary Policy Meeting held on June 12, as the basis of monetary policy decisions.Meanwhile, some firms, especially small and medium-sized firms, have been fac difficult financing conditions in terms of both funds availability and fund-raising influence on the overall economy continues to warrant a careful monitoring.