December 26, 2018
Bank of Japan
Japan's Economic and Price Developments
and Future Prospects
Speech at the Meeting of Councillors of Nippon Keidanren
(Japan Business Federation) in Tokyo
Haruhiko Kuroda
Governor of the Bank of Japan
Introduction
It is a great honor to have this opportunity to address such a distinguished gathering of
business leaders in Japan today.
This is the sixth time I have the occasion to give a speech here wrapping up the year. Today,
I would first like to talk about the Bank of Japan's view on domestic economic and price
developments while looking back on the past six years. Next, I will elaborate on efforts that
firms have made so far toward improving productivity, mainly in response to labor shortage,
and will then outline future prospects. Lastly, I will explain the Bank's conduct of monetary
policy.
I. Japan's Economic and Price Developments
Economic and Price Developments over the Past Six Years
Let me start by looking back at developments in Japan's economy. The economy has
improved significantly over the past six years or so since 2013 (Chart 1). The current
economic recovery phase, which began in December 2012, is likely to have reached 71
consecutive months this October. If this recovery continues, this month it will match the 73
months of the longest post-war recovery on record. Furthermore, looking at the output gap,
which shows the utilization of capital and labor, demand clearly started to exceed supply in
late 2016 and the output gap has continued to widen steadily within positive territory for
about two years since then.
In addition to this long duration, a significant feature of the current economic recovery
phase is that the economic expansion is well-balanced in that it is not led only by a specific
sector. Looking at business sentiment by industry in the previous prolonged recovery phase
in the mid-2000s, improvement in the economy as a whole was driven by certain parts of
the manufacturing sector -- such as automobiles and production machinery -- against the
background of favorable developments in exports (Chart 2). On the other hand, business
sentiment in sectors such as construction and retailing did not improve clearly throughout
the recovery phase. Thus, the degree of improvement in business sentiment differed
substantially across industries. In contrast, in the current recovery phase, business sentiment
has improved evenly across almost all industries in both the manufacturing and the
nonmanufacturing sector. The well-balanced nature of the recovery is also confirmed by
developments in business conditions by firm size (Chart 3). In the past few years, business
sentiment has clearly improved not only among large firms but also small and
medium-sized firms. This contrasts with the situation in the previous recovery phase, when
the degree of improvement differed significantly between the two. In terms of developments
by region, too, the current economic recovery does not center only on major metropolitan
areas. The active job openings-to-applicants ratios in local areas have substantially
exceeded the levels seen during the bubble period and show improvements comparable to
those in major metropolitan areas.
One of the reasons for this well-balanced economic recovery is the growth in demand in a
wide range of fields. For example, looking at developments in external demand, the
previous recovery phase was characterized by notable growth in exports of goods (Chart 4).
On the other hand, in the current recovery phase, exports not only of goods but also of
services have increased, led by demand from inbound tourism as well as royalties and
license fees from the overseas operations of Japanese firms, while growth in external
demand as a whole has been moderate. Specifically, the increase in demand from inbound
tourism has provided new business opportunities for a wide range of firms, regardless of
their region or size. In addition, looking at a breakdown of fixed capital formation in the
previous recovery phase, machinery investment increased against the background of growth
in exports, while investment in structures such as buildings decreased significantly (Chart 5).
In the current recovery phase, investment in both machinery and structures has been
increasing. Of these two, the increase in investment in structures is largely attributable to
the diversification in investment demand as a result of (1) increases in housing and public
investment, (2) investment in office buildings accompanying urban redevelopment projects,
(3) the construction of large distribution centers in response to the rapid growth in online
shopping, and (4) growing demand for the construction of accommodation facilities to meet
demand from inbound tourism.
Let me now talk about price developments in Japan over the past six years. The
year-on-year rate of change in the consumer price index (CPI) excluding fresh food turned
positive in mid-2013 and temporarily rose to 1.5 percent in spring 2014. However, it then
flattened and subsequently turned negative, mainly due to the significant decline in crude
oil prices (Chart 6). Yet, from around late 2016, the CPI started to increase moderately again
in line with the output gap turning positive, and recently has been around 1 percent. The
year-on-year rate of change in the CPI excluding fresh food and energy, which more clearly
shows the underlying trend in prices, has generally continued to be positive for more than
five years since mid-2013. Although the CPI has continued to show relatively weak
developments compared to the economic expansion and the labor market tightening, the
economy at least no longer has been in deflation over the past few years in the sense of a
sustained decline in prices.
Recent Economic Developments and Risks concerning Overseas Economies
As I just outlined, Japan's economic activity and prices have improved significantly over the
past six years. Currently, the economy is continuing its moderate expansion. Although the
real GDP growth rate for the July-September quarter of 2018 was negative on a
quarter-on-quarter basis, this likely is mainly because of the series of natural disasters,
which temporarily have exerted downward pressure on such components as exports,
production, and tourism. In fact, looking at developments since October, these components
have started to increase again after the decline in the July-September quarter (Chart 7).
As for the outlook, Japan's economy is likely to continue its moderate expansion. Regarding
this outlook, however, it is necessary to bear in mind that uncertainties have recently been
growing, mainly with respect to developments in overseas economies. In particular, it is
necessary to pay close attention to recent protectionist moves, including the trade friction
between the United States and China. While the results of the recent Tankan (Short-Term
Economic Survey of Enterprises in Japan) show that the impact of this problem on Japan's
economy so far likely has been limited, some firms have voiced that it is difficult to
accurately gauge the potential impact at this point given that economies have become
increasingly interdependent through global supply chains. Protectionist policies clearly do
not benefit any economy, and it is likely that a brake will be put on excessive protectionist
moves at some point. However, if we regard this problem of trade friction as part of the
broader issue of determining the future relationship between the United States and China, it
is undeniable that resolving the trade friction may take time. In this case, there is also a risk
that the impact of this problem on trade activities and economic activities in various
economies could become complex and broad-based, and that, depending on future
developments, the negative impact could be amplified through a deterioration in business
sentiment and instability in financial markets. Attention also needs to be paid to other risks
originating from overseas economies such as the possibility that the United Kingdom could
end up with a no-deal Brexit, the possibility that policy rate hikes in the United States could
lead to capital outflows from emerging economies, and various geopolitical risks including
those in the Middle East. Although the Chinese economy has continued to see stable growth
on the whole, relatively weak developments have been observed in part, as seen in the
recent deceleration in the pace of improvement in business sentiment in the country's
manufacturing sector. Whether this is due to the effects of the trade friction or a slowdown
in domestic demand resulting from factors such as deleveraging is something that needs to
be investigated.
Meanwhile, the stock market has continued to be somewhat unstable. The fluctuations in
the stock market are likely to be partly attributable to changes in perception of the various
risk factors surrounding the global economy that I mentioned earlier. The Bank will
continue to carefully examine developments in global financial markets and in the various
underlying risk factors.
II. Efforts toward Improving Productivity
Robustness of the Economy
As just explained, there are various risks surrounding the outlook for economic activity. As
I will elaborate later, however, the robustness of the domestic and overseas economies to
shocks appears to have increased. One of the reasons for this is the efforts made by firms so
far, and I think that it is necessary for these efforts to continue further. Let me now focus on
the efforts that firms have made so far toward improving productivity and outline how
continuing improvement in productivity can be expected to boost the growth potential of
Japan's economy and also address structural challenges such as the declining and aging
population.
At this meeting exactly a year ago, I brought up the problem of labor shortage and
mentioned that Japan's economy can be expected to overcome this constraint and continue
to grow. Firms have been making substantial progress so far in this regard. Amid the
tightening of labor market conditions in the past few years, many firms have been actively
undertaking labor-saving and efficiency-improving investment and streamlining business
processes to establish more efficient business operations. These efforts have been boosted
by the technological progress especially in information technology in recent years, as seen
in the significant increase in software investment in sectors such as construction, retailing,
as well as accommodations, eating and drinking services, where labor shortage is becoming
acute (Chart 8).
As just seen, positive efforts to improve labor productivity in response to the recent
tightening of labor market conditions are spreading among many firms in Japan. However,
quite a few firms have voiced doubt over the sustainability of economic growth going
forward. Even though the longest economic recovery in the post-war era has been achieved
and demand has increased to such a degree that firms suffer from labor shortage more acute
than during the bubble period, not a few firms have expressed cautious views about the
future. The recent increase in uncertainties surrounding overseas economies likely has led to
a more cautious sentiment among firms to some extent. In addition, there is also a
possibility that the experience of prolonged low growth and deflation makes such
uncertainties appear greater. However, there is no need to fall into excessive pessimism for
reasons I will now explain.
First, let us take a look at overseas economies. Despite various risks, overseas economies
have continued to grow firmly on the whole, with domestic demand in many economies
World Economic Outlook
continuing on an increasing trend. In the (WEO) released by the
International Monetary Fund (IMF) in October, although forecasts were somewhat revised
downward from the previous ones released in July, the annual real GDP growth rates for
2018 and 2019 are both projected to be 3.7 percent, continuing to mark relatively high
growth close to the peak registered since the global financial crisis (Chart 9). As for the U.S.
economy, prospects for the long-term growth potential have improved compared to some
time ago. Another important point is that no overheating of the economy or notable
financial imbalances have been observed. Although the economic recovery of the United
States has continued for more than 110 consecutive months, which is longer than Japan's
current recovery phase, so far no signs of the spread of a bubble can be detected. This is
partly because the pace of growth has been moderate during this period and various
financial regulations based on lessons learned from the global financial crisis have been put
in place. Given these observations, the continuing stable growth of the U.S. economy -- the
growth engine of the global economy -- provides substantial grounds for confidence in
Japan's economy as well.
Second, the diversification of growth sectors of Japan's economy is also an important factor
enhancing the robustness of the economy. I mentioned earlier that services exports have
made a substantial contribution to growth in external demand, while investment in
structures has significantly contributed to growth in fixed capital formation, and such
well-balanced growth is likely to raise the resilience of Japan's economy to future shocks.
Third, a point worth mentioning is that the profitability of Japanese firms has improved.
Even more than the level of corporate profits, what is important in this context is the nature
of these profits. While corporate profits have been improving over the past six years, until
around 2016, the main reason was the decline in crude oil prices. Meanwhile, sales volumes
did not increase very much and turnover also remained more or less flat (Chart 10). It is
said that profit improvements taking this form are unlikely to spur active and
forward-looking behavior such as increases in business fixed investment. However, over the
past two years or so, the nature of the improvements in profits has changed in that they have
been accompanied by increases in sales volumes and turnover. This indicates that firms can
have greater confidence in their profits, which is more likely to lead to increases in business
fixed investment.
Future Prospects
Based on the observations I just highlighted, even if there were some kind of shock, Japan's
economy and the global economy likely are sufficiently robust to withstand it. Under these
circumstances, with firms continuing to actively make efforts toward improving
productivity, it can be expected that the various concerns will be gradually resolved as
Japan's economy continues to grow in a sustainable manner. Needless to say, labor
productivity is defined as the value added per unit of labor input and represents the earning
power per worker or unit of labor input such as the hourly labor input. As can be seen from
this definition, raising labor productivity can be divided into two parts: efforts to save labor
input, which is the denominator; and efforts to increase value added, which is the numerator.
As I mentioned earlier, in the past few years, Japanese firms have made efforts to reduce
labor input through such measures as labor-saving investment, reflecting the tightening of
labor market conditions. Such efforts have been particularly pronounced in the
nonmanufacturing sector, where there remains substantial room for productivity
improvements compared to other economies. In fact, Japan is exhibiting the highest pace of
growth in labor productivity among G7 countries (Chart 11). In order to further improve
labor productivity, it is important to increase value added, which is the numerator of labor
productivity. To this end, it is necessary to further create and exploit potential demand.
Examples of the successful creation of new demand are provided by products in which
Japan has an advantage such as cosmetics or sake (rice wine). Domestic sales of these
products to tourists visiting Japan have led to repeat sales abroad when the tourists returned
home, leading to an increase in turnover. In addition, the diversification and advances in
housekeeping services, security services, and household electrical appliances can be
regarded as creating demand stemming from the rapid increase in dual-working and senior
households. Furthermore, new technologies such as rapidly advancing artificial intelligence
(AI) and big data are likely to be powerful tools to exploit potential demand that otherwise
cannot be captured. For example, the development of new means of transportation through
self-driving systems and the provision of preventive medical services using real-time data
of people's health condition have been attracting attention as businesses with future
potential that did not exist before.
Naturally, there is no specific method to create and exploit potential demand, and it can be
said that innovative efforts play an important role. One of the things needed to this end is
securing imaginative and creative human capital. While there are a number of key points to
securing human capital -- such as creating appropriate work environments including via
working-style reforms -- increasing wages through sustainable productivity improvements
is another important point. Pushing ahead with labor-saving investment in response to the
labor shortage ultimately is likely to help to grasp opportunities to capture new demand
through increasing wages and securing superior human capital.
For firms engaged in creating and exploiting such potential demand, the government's
growth strategy and structural reforms offer great opportunities. The Bank is actively
supporting firms' investment activities by maintaining highly accommodative financial
conditions through powerful monetary easing. I would like firms to take advantage of this
excellent environment and continue to pursue efforts toward improving productivity. The
ultimate driver of economic growth is the animal spirit of firms. We hope to achieve
sustainable growth of Japan's economy as a whole, with the government, the Bank, and
firms working together as one.
III. The Bank's Conduct of Monetary Policy
Lastly, I will talk about the Bank's monetary policy.
As stipulated by the Bank of Japan Act, the Bank's monetary policy conduct "shall be aimed
at achieving price stability, thereby contributing to the sound development of the national
economy." Based on this, the Bank has set a price stability target of 2 percent and conducts
monetary policy with the aim of creating a virtuous cycle in the economy in which the
inflation rate rises moderately along with increases in corporate profits, employment, and
wages. While the government's growth strategy and flexible fiscal policy should provide
strong support to achieve such sustainable economic growth, the Bank's stance to fulfill its
role and do its utmost to achieve the price stability target has remained and will remain
unchanged.
Of course, as experience shows, the economic and price situation can change as a result of a
range of factors. Therefore, in fulfilling its mandate, the Bank needs to pursue the monetary
policy that is most appropriate to the situation at the time while weighing up its benefits and
costs. This view is held not only by the Bank of Japan but is shared by central banks
worldwide and will not change regardless of the kind of policy measures adopted.
When the Bank introduced quantitative and qualitative monetary easing (QQE) six years
ago, Japan's economy was not recovering and the year-on-year rate of change in the CPI
was negative, far from the price stability target of 2 percent. Under these circumstances, the
benefits of adopting bold monetary easing measures significantly outweighed the costs. The
Bank therefore judged it appropriate to take drastic measures focusing on achieving the
price stability target of 2 percent at the earliest possible time and embarked on bold
measures that were substantially different from those in the past, such as the significant
expansion of the monetary base.
Such powerful monetary easing likely played a role in the substantial improvement of
Japan's economy. On the price front, the economy already is no longer in deflation in the
sense of a sustained decline in prices. However, prices have continued to show relatively
weak developments compared to the economic expansion and the labor market tightening,
and it is still taking time to achieve the price stability target. Moreover, recently, downside
risks mainly regarding overseas economies have come to warrant further attention. In this
somewhat complicated situation, what is required is to persistently continue with the current
powerful monetary easing while taking account of both the positive effects and the side
effects -- that is, the benefits and costs -- of monetary easing in a balanced manner. This is
exactly the kind of situation in which policy sustainability and durability is important.
Let me elaborate. In terms of positive effects, it is necessary to maintain a positive output
gap -- a driver for inflation -- for as long as possible under the current framework of "QQE
with Yield Curve Control" and thereby firmly sustain the momentum toward 2 percent
inflation. At the July Monetary Policy Meeting (MPM), the Bank introduced forward
guidance for policy rates and made clear that it would "maintain the current extremely low
levels of short- and long-term interest rates for an extended period of time." This is also a
measure that clarifies the Bank's policy stance of continuing with the current powerful
monetary easing.
On the other hand, in order to strengthen the sustainability and durability of this powerful
monetary easing, the side effects of the policy also warrant attention. In the first half of this
year, it was pointed out that the functioning of the Japanese government bond (JGB) market
had deteriorated under the Bank's large-scale JGB purchases, as seen, for example, in
somewhat rigid interest rate formation. Therefore, at the July MPM, the Bank also decided
to conduct market operations and asset purchases in a more flexible manner. As a result, the
degree of market functioning has improved, with JGB yields moving upward and downward
again in tandem with stock prices and U.S. interest rates. In addition, the Bank is aware that
prolonged downward pressure on financial institutions' profits, with the low interest rate
environment and severe competition among financial institutions continuing, could create
risks of a gradual pullback in financial intermediation and of destabilizing the financial
system. Although these risks are judged as not significant at this point, mainly because
financial institutions have sufficient capital bases, it is necessary to pay close attention to
future developments, including from the perspective of maintaining policy sustainability
and durability.
As explained, the Bank will proceed step by step toward achieving the price stability target
under the powerful monetary easing while taking into account in a balanced manner not
only the benefits of monetary easing but also its costs. It is likely to take more time than
expected to achieve the price stability target, and uncertainties regarding the outlook have
heightened further. However, firmly maintaining the momentum toward achieving 2 percent
inflation through such policy conduct will ultimately help to ensure the price stability target
is achieved at the earliest possible time without putting an excessive burden on the real
economy and the functioning of financial intermediation.
Conclusion
It seems that we are almost out of time. Today, I looked back on the economic recovery
over the past six years and talked in some detail about firms' efforts toward improving
productivity so far and future prospects. I also touched upon the possibility that responding
to the recent labor shortage and actively proceeding with measures such as labor-saving
investment will ultimately help firms to secure talented human capital and create and
exploit new demand. The Bank will provide its utmost support for such efforts by firms
through maintaining highly accommodative financial conditions.
2019 is the year of the boar in the Japanese Zodiac. While boars tend to have a reputation of
heading to a target only in a bold way, experts say that they are brave and at the same time
actually are extremely cautious animals. In 2019, the Bank will continue to steadily work
toward achieving the price stability target. During the process, it will thoroughly examine
various risks including those regarding developments in overseas economies. Although we
should not be overly pessimistic, it is always necessary to calmly watch the surroundings.
Based on this, the Bank will weigh up the benefits and costs of its policies and implement
the policies most appropriate to the situation at the time.
In little more than four months, the Heisei era will draw to a close and make way for a new
era. Taking this juncture as an opportunity to look at Japan's economy from a broader
perspective, the impact of the prolonged deflation of the past persists in the form of cautious
wage setting and a reluctance to accept price rises. At the same time, however, the cautious
attitude on the part of firms and households has been dissipating slowly but steadily on the
back of the economic expansion and tight labor market conditions over the past few years.
In the new era that is about to start, the Bank will continue to firmly fulfill its responsibility
as the central bank in order to ensure the achievement of the price stability target and
contribute to sustainable economic growth.
I would like to close my speech by expressing my sincere hope that the year 2019 will be a
wonderful one for all of you.
Thank you for your attention.
Japan's Economic and Price Developments
and Future Prospects
Speech at the Meeting of Councillors of
Nippon Keidanren (Japan Business Federation) in Tokyo
December 26, 2018
Haruhiko Kuroda
Governor of the Bank of Japan
Introduction
I. Japan's Economic and Price Developments
II. Efforts toward Improving Productivity
III. The Bank's Conduct of Monetary Policy
Conclusion
Chart 1
I. Japan's Economic and Price Developments
Japan's Economy
Real GDP Output Gap
s.a., ann., tril. yen
%
540 4
Excess demand
2
520
0
500
-2
480
-4
Excess supply
460
-6
440
-8
CY
00 02 04 06 08 10 12 14 16 18 CY 00 02 04 06 08 10 12 14 16 18
Notes: 1. Shaded areas indicate recession periods.
Notes: 2. The output gap is based on BOJ staff estimations.
Sources: Cabinet Office; Bank of Japan.
1
Chart 2
I. Japan's Economic and Price Developments
Well-Balanced Economic Recovery (by Industry)
Business Conditions DI (Tankan)
Comparison of Peaks in the Previous Prolonged
Manufacturing and Nonmanufacturing
Economic Recovery Phase with Current Levels
DI ("favorable" - "unfavorable"), % points
DI ("favorable" - "unfavorable"), % points
30
Manufacturing Peak during Current
Previous Recovery
Nonmanufacturing
20
Prolonged (CY 2018
Recovery Average)
10
Iron and steel
55 34
0
Motor vehicles
39 24
Manufacturing General-purpose,
-10
production and business
38 33
"Favorable"
oriented machinery
-20
Ceramics, stone and clay
3 18
-30
Construction
-12 24
-40
Retailing
-3 1
"Unfavorable"
Wholesaling 6 10
-50
Nonmanufacturing
Transport and
5 13
-60
postal activities
CY
00 02 04 06 08 10 12 14 16 18
Services for individuals 6 10
Well-Balanced Economic Recovery
(by Enterprise Size and Area)
Business Conditions DI Active Job Openings-to-Applicants
by Enterprise Size (Tankan) Ratio by Area
DI ("favorable" - "unfavorable"), % points s.a., ratio
1.8
40
Large enterprises
Three metropolitan areas
30 1.6
Small enterprises
Nonmetropolitan areas
20
1.4
10
1.2
0
1.0
-10
"Favorable"
0.8
-20
0.6
-30
0.4
-40
"Unfavorable"
0.2
-50
-60
0.0
CY 00 02 04 06 08 10 12 14 16 18 CY
85 90 95 00 05 10 15
Notes: 1. Shaded areas indicate recession periods.
Notes: 2. In the left chart, there is a discontinuity in the data in December 2003 due to a change in the survey framework.
Notes: 3. In the right chart, "three metropolitan areas" refer to the Tokyo area (Tokyo, Kanagawa, Saitama, Chiba, and Ibaraki prefectures), the Osaka area (Osaka, Hyogo, Kyoto, and Nara
prefectures), and the Nagoya area (Aichi and Mie prefectures). "Nonmetropolitan areas" are areas other than the three metropolitan areas. Figures for 2018/Q4 are those for October.
Sources: Ministry of Health, Labour and Welfare; Bank of Japan. 3
Chart 4
I. Japan's Economic and Price Developments
Diversification in Exports
Previous Prolonged
Current Economic Recovery Phase
Economic Recovery Phase
(December 2012 -)
(February 2002 - February 2008)
change from CY 2001, real, tril. yen change from CY 2012, real, tril. yen
35 35
30
30
Goods Goods
Services
25 Services 25
Exports Exports
20 20
15 15
10 10
5 5
0 0
-5 -5
CY 01 02 03 04 05 06 07 CY 12 13 14 15 16 17 18
Diversification in Investment in Tangible Assets
(Fixed Capital Formation)
Previous Prolonged
Current Economic Recovery Phase
Economic Recovery Phase
(December 2012 -)
(February 2002 - February 2008)
change from CY 2001, real, tril. yen change from CY 2012, real, tril. yen
20 20
Machinery and equipment, etc. Machinery and equipment, etc.
15 Buildings and structures 15 Buildings and structures
Total Total
10 10
5 5
0 0
-5 -5
-10 -10
-15 -15
-20 -20
CY 01 02 03 04 05 06 07 CY 12 13 14 15 16 17 18
Note: Figures for 2018 are Q1 - Q3 averages on a seasonally adjusted annualized basis.
Source: Cabinet Office.
5
Chart 6
I. Japan's Economic and Price Developments
Consumer Prices
y/y % chg.
3
2005 base 2010 base 2015 base
2
1
0
-1
CPI (all items less fresh food)
-2
CPI (all items less fresh food and energy)
-3
CY
Recent Exports of Goods, Production,
and Number of Foreign Visitors
Number of Foreign
Real Exports Industrial Production
Visitors to Japan
s.a., CY 2015=100 s.a., CY 2015=100
s.a., ann., mil. persons
115 110
35
30
110
105
25
105
20
100
15
100
10
95
95
5
90 90
0
CY CY
10 11 12 13 14 15 16 17 18 10 11 12 13 14 15 16 17 18
CY 10 11 12 13 14 15 16 17 18
Notes: 1. The figure for real exports for 2018/Q4 is the October-November average.
Notes: 2. The figure for industrial production for 2018/Q4 is that for October.
Notes: 3. The figure for the number of foreign visitors to Japan for 2018/Q4 is the October-November average. Seasonally adjusted figures are BOJ staff estimates.
Sources: Ministry of Finance; Ministry of Economy, Trade and Industry; JAPAN NATIONAL TOURISM ORGANIZATION; Bank of Japan.
7
Chart 8
II. Efforts toward Improving Productivity
Progress in Labor-Saving Investment
Employment Conditions DI (Tankan) Software Investment (Tankan)
reversed, DI ("excessive" - "insufficient"), % points
FY 2005 = 100
-80
250
All industries
"Insufficient"
All industries
-70
Construction
Construction
-60
Retailing
Accommodations,
200 Retailing
-50
eating and drinking
Accommodations, eating and
services
-40
drinking services
-30
150
-20
-10
0
100
10
20
30 50
CY 05 06 07 08 09 10 11 12 13 14 15 16 17 18 FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Global Economy
Potential Growth Rate of
Growth Rate of the Global Economy
the U.S. Economy (Estimates)
IMF's outlook
(as of October 2018)
y/y % chg. y/y % chg.
2.2
3.8
3.7 3.7
As of August 2018
3.7
2.0
As of June 2017
3.6
1.8
3.5
1.6
3.4
1.4
3.3
1.2
3.2
1.0
3.1
0.8
3.0
CY
CY 12 13 14 15 16 17 18 19 10 11 12 13 14 15 16 17 18 19 20 21
Sources: IMF; CBO. 9
Chart 10
II. Efforts toward Improving Productivity
Changes in Corporate Profits
Profitability Profits and Sales
tril. yen tril. yen
s.a., %
7
90 1,450
Ratio of current profits to sales Current profits (left scale)
6
Ratio of operating profits to sales Sales (right scale)
80
1,400
5
70
4
1,350
3
60
2
1,300
50
1
0 40 1,250
CY 00 02 04 06 08 10 12 14 16 18 CY 12 13 14 15 16 17 18
International Comparison of Labor Productivity
Growth Rate of Labor Productivity Level of Labor Productivity
ann., y/y % chg. (CY 2010-2017 average) CY 2017, U.S.=100
120
1.4
1.2
100
1.0
80
0.8
60
0.6
40
0.4
20
0.2
0.0 0
Note: The charts are based on PPP-adjusted real labor productivity per hour.
Source: Conference Board.