J u l y 2 8 , 2 0 2 2
Bank of Japan
Japan's Economy and Monetary Policy
Speech at a Meeting with Local Leaders in Iwate
AMAMIYA Masayoshi
Deputy Governor of the Bank of Japan
Introduction
It is my pleasure to have the opportunity today to exchange views with leaders in
administrative, financial, and economic areas in Iwate Prefecture. I would like to take this
chance to express my sincere gratitude for your cooperation with the activities of the Bank
of Japan's Morioka Office and Sendai Branch.
At the Monetary Policy Meeting (MPM) held last week, the Bank of Japan updated its
projections for Japan's economic activity and prices through fiscal 2024 and released them
in the latest Outlook for Economic Activity and Prices (Outlook Report). Today, I would
like to talk about the Bank's view on Japan's economic activity and prices based on the
Outlook Report and explain its thinking on the conduct of monetary policy.
I. Economic Developments
Current Situation
I will start by talking about the current state of Japan's economy. While the economy had
continued to swing up and down for a prolonged period, depending on the situation with the
novel coronavirus it has been picking up since spring this year with the
(COVID-19),
impact of waning.
COVID-19
Looking at developments in the household sector, the pandemic has exerted
COVID-19
downward pressure on consumption activity that involves close contact with others and
physical visits to places, particularly services consumption, such as
face-to-face dining-out
and travel (Chart 1). Due to the spread of the Omicron variant, private consumption for the
quarter of 2022 was somewhat weak, mainly for services. However, since
January-March
the lifting in late March of the priority measures to prevent the spread of disease, a recovery
in private consumption has become evident along with an increase in the number of people
going out. In fact, sales in the food services industry have been approaching
pre-pandemic
levels on the whole, although weakness has remained in demand for large group meetings
and afterparties, for example. In addition, based on various sources, such as anecdotal
information that the Bank obtained from firms, domestic travel at the start of the summer
holiday season appears to have been steady, partly due to the effects of travel and
accommodation discounts provided by the local governments that have been aimed at local
residents. However, the recent increase in the number of COVID-19 cases is concerning,
especially because its pace is extremely rapid. In addition, rises in prices of such items as
energy and food have led to deterioration in consumer sentiment, and developments
associated with these rises warrant due attention.
Turning to developments in the corporate sector, firms' production activity has been under
strong downward pressure due to global constraints, and the impact of this has
supply-side
spread not only to exports but also to domestic business fixed investment and consumption
of durable goods (Chart 2). The pandemic has triggered a major shift in demand
COVID-19
from services to goods on a global basis and has brought about a rapid expansion in
demand and a resultant semiconductor shortage, partly through widespread
digital-related
adoption of online conferences and working from home. In this situation, there have been
successive suspensions of operations at factories as a result of restrictions
pandemic-related
around the world, and the effects of constraints therefore have become more
supply-side
prolonged than initially expected. With the addition of the impact of disruptions in
distribution networks due to lockdowns in Shanghai, there have been difficulties in
procuring parts recently, and the level of Japan's production has declined clearly, mainly for
goods. In this situation, exports have remained on an uptrend, supported
automobile-related
by a recovery in overseas economies, but they have seen a halt in their improvement
recently due to the effects of constraints. Regarding consumption of durable
supply-side
goods, automobile sales have been at low levels due to strong constraints, and
supply-side
the lead time from purchase of automobiles to delivery appears to have become longer.
Based on various sources such as anecdotal information from firms, the impact of
lockdowns in China seems to have waned gradually, but developments warrant attention as
the number of cases in the country has been increasing again amid the Chinese
COVID-19
government maintaining the policy.
so-called zero-COVID
In sum, with the impact of waning, Japan's economy has finally started to show
COVID-19
positive signs, especially in the services sector. However, due to the constraints
supply-side
I just mentioned, production activity in the manufacturing industry has been pushed down.
These developments were reflected in the June 2022 Tankan Economic Survey
(Short-Term
of Enterprises in Japan), which shows that business sentiment for the nonmanufacturing
industry has improved, whereas that for the manufacturing industry has deteriorated.
Outlook
The outlook for Japan's economy is that, although it is expected to be under downward
pressure stemming from high commodity prices due to factors such as the situation
surrounding Ukraine, it is likely to recover with the impact of waning and
COVID-19
constraints dissipating.
supply-side
To explain this outlook in some detail, let me first focus on the household sector (Chart 3).
Due mainly to restrictions and during the pandemic, private consumption
self-restraint
became notably subdued relative to income. However, it has increased moderately, mainly
for services consumption such as and travel, with the impact of
dining-out COVID-19
waning. Regarding the outlook, although private consumption is expected to be under
downward pressure due to price rises, it is projected to keep increasing because savings that
have accumulated to date are expected to provide support and because demand, i.e.,
pent-up
demand that had been held back under restrictions, is likely to materialize.
pandemic-related
Meanwhile, employee income has improved moderately, reflecting rises in the number of
employees and wages associated with a recovery in economic activity. Such improvement
in employee income is projected to continue; supported by this, private consumption is
expected to keep increasing steadily from fiscal 2023 onward, although the pace of
materialization of demand is likely to slow.
pent-up
I will now turn to the corporate sector (Chart 4). Exports are likely to increase, mainly for
and goods, as overseas economies continue recovering and as
automobile- digital-related
constraints dissipate. With regard to corporate profits, the Financial Statements
supply-side
Statistics of Corporations by Industry, Quarterly show that current profits have marked a
new record high for fiscal 2021. Although raw material cost increases are projected to exert
downward pressure, corporate profits are likely to be at high levels on the whole, albeit with
variation across industries and firm sizes, on the back of an increase in domestic and
external demand and partly also of the effects of the yen's depreciation. In this situation, an
uptrend in business fixed investment is expected to become clear as accommodative
financial conditions provide support and supply-side constraints wane. In fact, the business
fixed investment plan for fiscal 2022 in the June 2022 Tankan indicates that investment is
projected to increase more firmly than usual. It is expected that firms will take an
increasingly active stance not only toward investment to address labor shortage
labor-saving
but also toward other business fixed investment, including for research and development in
areas such as digitalization and decarbonization.
In terms of the medians of the Policy Board members' forecasts, Japan's real GDP growth
rate is expected to be at 2.4 percent for fiscal 2022, 2.0 percent for fiscal 2023, and 1.3
percent for fiscal 2024 (Chart 5). As Japan's recent potential growth rate is estimated to be
in the range of percent, the forecasts show that the economy is projected to continue
0.0-0.5
growing at a pace above its potential growth rate for four consecutive years when including
fiscal 2021. The level of GDP is expected to recover to the level (the 2019
pre-pandemic
average) around the second half of this fiscal year. However, the pace of recovery has been
slower than in Europe and the United States, a topic to which I will return later.
Risks to the Outlook
There are extremely high uncertainties over the outlook, and risks to economic activity are
skewed to the downside for the time being. I am paying particular attention to the following
two risk factors.
The first is the sustainability of a rise in private consumption. As mentioned earlier, private
consumption for the time being is expected to be under downward pressure from the real
income side but is projected to increase, supported by demand. That said, since
pent-up
demand is expected to materialize in services consumption in particular, including
pent-up
and travel, developments in such demand depend largely on the future course of
dining-out
Moreover, demand by its nature wanes gradually. Thus, for a sustained
COVID-19. pent-up
increase in private consumption, it is essential that wages rise. In this regard, if, for example,
prices of commodities, including grains, remain high for a prolonged period amid high
uncertainties over the situation surrounding Ukraine, wage increases will not sufficiently
catch up with overall price rises and Japan's economy could be pushed down, particularly
for private consumption.
The second factor is overseas economic activity and prices (Chart 6). Looking at the latest
World Economic Outlook (WEO) Update released by the International Monetary Fund
(IMF), the projected growth rates of the global economy have been revised downward from
the projections made in April. This is due to the impact of the situation surrounding Ukraine,
lockdowns in China, and central banks' shift toward monetary tightening in response to
rising inflation around the world. It should be noted, however, that the latest WEO forecasts
show that global economic growth will remain positive at around 3 percent for both 2022
and 2023, indicating that the global economy is not expected to fall into recession. That said,
there is concern in global financial and capital markets over whether it is possible to contain
inflation and maintain economic growth simultaneously. Under these circumstances, there is
a risk that global financial conditions will tighten further through adjustments in asset prices,
fluctuations in foreign exchange markets, and capital outflows from emerging economies,
and that this will eventually push down overseas economies. The Bank considers it
necessary to continue to pay due attention to developments in financial and foreign
exchange markets and their impact on Japan's economic activity and prices.
II. Price Developments
Next, let me talk about price developments. The rate of change in the
year-on-year
consumer price index (CPI) for all items excluding fresh food has been at around 2 percent
since April, when much of the impact of last year's reduction in mobile phone charges
dissipated (Chart 7). The main cause of recent price increases is rises in energy prices, such
as gasoline and kerosene prices and electricity charges, and in food prices. In this regard, for
June, the rate of change in the CPI excluding fresh food and energy was 1.0
year-on-year
percent and that excluding energy and food was 0.2 percent.
Comparing price developments in Japan with those abroad, the rates of change
year-on-year
in consumer prices for all items have been at 9.1 percent in the United States, the highest
rate in about 40 years, and at 8.6 percent in the euro area, the highest since recordkeeping
began in 1997. This shows that both regions are experiencing elevated inflation and that
Japan's inflation rate has remained comparatively low. It should be noted, however, that the
rate in Japan has risen gradually. In fact, this April was the first time that Japan's CPI
inflation rate exceeded 2 percent since 2008.
Looking at developments behind price rises in Japan, import prices have increased due to a
global rise in prices of commodities, including grains, and to the yen's depreciation. In
addition, under these circumstances, firms have been increasingly passing on cost increases
to selling prices, partly due to the impact of product shortages caused by prolonged
constraints. Thus, the rate of change in the CPI for all items
supply-side year-on-year
excluding fresh food is likely to increase toward the end of this year due to rises in prices of
such items as energy, food, and durable goods, and the average for fiscal 2022 is expected
to exceed 2 percent, at 2.3 percent. However, unless we assume that prices of commodities
such as crude oil will continue rising in the future, it is projected from the beginning of
2023 that the positive contribution of the rise in energy prices to the CPI will wane and the
of cost increases will weaken gradually. As a result, the rate of
pass-through year-on-year
increase in the CPI for all items excluding fresh food is expected to decelerate from fiscal
2022 to 1.4 percent for fiscal 2023 and 1.3 percent for fiscal 2024. In terms of inflation that
also excludes energy, for which prices see significant fluctuations, the
short-term
rate of change in the CPI is likely to increase moderately in positive territory
year-on-year
on the back of improvement in the output gap, rises in to inflation
medium- long-term
expectations, and in wage growth. That said, even in fiscal 2024, which is the end of the
projection period, the rate of increase is expected to only be at around 1.5 percent. In sum,
achievement of the price stability target of 2 percent in a sustainable and stable manner is
not yet envisaged at this point.
III. The Bank's Conduct of Monetary Policy
Basic Thinking on Monetary Policy
Let me now talk about the Bank's conduct of monetary policy.
The Bank conducts monetary policy with the aim of achieving the price stability target in a
sustainable and stable manner. Achieving the price stability target does not mean that the
rate of change in the CPI temporarily reaches 2 percent due to an exogenous
year-on-year
increase in import prices such as energy, but rather that the rate registers 2 percent on
average over the business cycle. From this perspective, it is necessary to examine the
sustainability of price increases by comprehensively assessing the outlook for prices, as
well as the underlying output gap, to inflation expectations, and wage
medium- long-term
developments, in addition to various measures of core inflation, which exclude temporary
fluctuations. What is important is to achieve a virtuous cycle where wages and prices rise
simultaneously and people's living standards improve amid continued growth in the
economy.
In this regard, Japan's economy is still on its way to recovery from the downturn caused by
In fact, unlike the United States and the euro area, Japan's GDP has not yet
COVID-19.
recovered to the level (Chart 8). Furthermore, as Japan relies on imports for
pre-pandemic
most commodities, the recent high commodity prices associated with the situation
surrounding Ukraine and other factors have exerted downward pressure on the economy in
the form of an outflow of income from Japan. The value of commodity imports for the
quarter increased by slightly less than 4 trillion yen from the quarterly average
April-June
of the previous fiscal year. This means an additional income outflow of about 2 to 3 percent
of GDP. Thus, the foundation for Japan's economy to recover is not yet firm, and with high
uncertainties surrounding wage developments, it is necessary to support economic activity
through monetary easing.
Based on this recognition, at the MPM held last week, the Bank decided to maintain its
aggressive monetary easing stance under the monetary policy framework of yield curve
control. With this framework, Japan's interest rates have remained at extremely
long-term
low levels, even amid strong upward pressure from abroad on the interest rates. Since
Japan's nominal interest rates have remained low while people's inflation
long-term
expectations have risen, real interest rates, calculated by subtracting inflation expectations
from nominal interest rates, appear to have declined recently (Chart 9). Although it should
be noted that real interest rates can take various values depending on the combination of the
maturity of nominal interest rates and the type of inflation expectations used for their
calculation, to real interest rates have generally been on a downtrend,
short- medium-term
and the effects of monetary easing are considered to have been greater than before.
Nevertheless, given that achievement of the price stability target of 2 percent in a
sustainable and stable manner is not yet envisaged, as shown in the latest Outlook Report,
and that there are high uncertainties surrounding wage developments, it is necessary for the
Bank to continue with monetary easing steadfastly.
Importance of Wage Increases toward Achieving the Price Stability Target
Next, I would like to share the Bank's views on future wage developments, which are the
key to achieving the price stability target. As I mentioned earlier, for the time being, savings
that have accumulated as a result of restrictions and demand will
pandemic-related pent-up
serve as a buffer to prevent private consumption from stalling. However, for such
consumption to see a sustained expansion even after demand runs out, nominal
pent-up
wages need to rise at a higher rate than the inflation rate.
In this regard, for the current fiscal year, this spring's base pay increase is expected to be
reflected in scheduled cash earnings of employees, and summer bonuses are also
full-time
likely to increase, mainly for the manufacturing industry, on the back of high corporate
profits (Chart 10). In addition, wages of employees, many of whom work in the
non-regular
services sector, are also projected to gradually show a clear upward trend,
face-to-face
supported mainly by the materialization of demand in and travel. Thus,
pent-up dining-out
wages are expected to rise for this fiscal year. That said, their growth is not projected to
exceed CPI inflation.
It is worth mentioning that further increases in wages, including base pay, can be expected
from the next fiscal year onward, as labor market conditions are likely to tighten on the
back of improvement in the economy and the increased rate of inflation is expected to be
taken into account in wage negotiations. Under these circumstances,
labor-management
together with a decline in the inflation rate, wage growth is projected to exceed CPI
inflation.
In general, wage formation is affected by a variety of factors, including labor productivity,
growth expectations, labor union bargaining power, and minimum wages. Monetary policy,
as a macroeconomic policy, also has an impact on such formation through its influence on
such factors as labor market conditions. Specifically, the Bank's monetary easing will first
support positive spending activity of firms and households and boost aggregate demand
through accommodative financial conditions such as lower funding costs. This will lead to
an increase in corporate profits and, through higher corporate demand for labor, bring about
a tightening of labor market conditions, which in turn will contribute to wage increases. The
Bank will continue to firmly support economic activity through monetary easing, aiming to
achieve the price stability target, accompanied by wage increases, in a sustainable and
stable manner.
IV. Current Situation of and Outlook for Iwate Prefecture's Economy
Lastly, I would like to talk about the economy of Iwate Prefecture.
The Bank assesses that the prefecture's economy has picked up moderately. As with
nationwide developments, although Iwate Prefecture's production has seen a halt in its
mainly due to the effects of constraints private consumption,
pick-up -- supply-side --
especially services consumption, has improved with the impact of such factors as
waning.
COVID-19
Looking at developments in tourism in particular, Iwate Prefecture is blessed with a wealth
of appealing tourism resources, such as the Goshono Site, which as one of the Jomon
--
Prehistoric Sites in Northern Japan was registered as a World Heritage Site in July last
--
year. Moreover, four days from now, the Morioka Sansa Odori Festival, which
unfortunately had been canceled previously due to the pandemic, will be held for the first
time in three years. Expectations are growing for further improvement in services
consumption.
Eleven years have passed since the unprecedented disaster of the Great East Japan
Earthquake. During that time, Iwate Prefecture's residents, businesses, and local
administrations have worked on reconstruction. I visited
hand-in-hand disaster-stricken
areas during my stay in Iwate Prefecture and witnessed efforts to pass along the experiences
and lessons learned from the disaster to future generations. It is encouraging to see the
steady progress in building up the social infrastructure, including the network of
"reconstruction roads," such as the Sanriku coastal road, and "reconstruction support roads."
At the same time, I also felt keenly once again how tough it is to rebuild after a disaster.
Iwate Prefecture faces the task of maintaining the vitality of the regional economy while
addressing the crucial challenges of a rapidly declining population, a falling birth rate and
aging population, and climate change. To meet this task, I think it is inevitable that the
prefecture will devise ways of capturing demand not only from within the region but from
throughout the country and the world. From this point of view, I am paying attention to two
promising developments in the prefecture.
The first is the accumulation of and manufacturing
automobile- semiconductor-related
industries in the southern part of the prefecture, which has come about through efforts to
attract production facilities there. This reflects in part a positive assessment of better
transportation access in the region, the benefits of risk diversification, and the success of
actions to attract businesses. I think this accumulation of manufacturing
public-private
industries will also further encourage firms' recent moves to bring supply chains back to
Japan.
The other development is the progress being made with digitalization to revitalize the
prefecture's economy, with a view to the era. I am given to understand that a
post-pandemic
joint committee has been set up to promote digital transformation in Iwate Prefecture, and
under its direction, industry, academia, government agencies, and financial institutions all
across the prefecture are collaborating in multifaceted efforts, such as addressing regional
challenges, boosting firms' productivity, and dealing with labor shortages. I believe these
actions will be crucial to resolving the issues facing the region.
Let me conclude by expressing my sincere hope that Iwate Prefecture, which is pursuing
reconstruction and transformation, will achieve further revitalization of the regional
economy through these efforts. Thank you very much for your attention.
Economy
Japan's and Monetary Policy
Speech at a Meeting with Local Leaders in Iwate
July 28, 2022
AMAMIYA Masayoshi
Deputy Governor of the Bank of Japan
Introduction
I. Economic Developments
II. Price Developments
III. The Bank's Conduct of Monetary Policy
IV.Current Situation of and Outlook for Iwate
Prefecture's Economy
Private Consumption
Consumption Activity Index Consumption of Services
s.a., CY 2019 = 100 s.a., CY 2019 = 100
110 140
Total number of overnight guests
(excluding inbound visitors)
120
100
Sales in the food services industry
100
90
80
60
80
40
70
20
Total real private consumption
Services
60 0
Jan. July Jan. July Jan. July Jan. Jan. July Jan. July Jan. July Jan.
19 20 21 22 19 20 21 22
Note: In the left-hand chart, figures for total real private consumption are the real Consumption Activity Index (travel balance adjusted) based on staff calculations, which exclude inbound
tourism consumption and include outbound tourism consumption.
Sources: Bank of Japan; Japan Tourism Agency; Japan Foodservice Association, "Market Trend Survey of the Food Services Industry."
1
Chart 2
I. Economic Developments
Corporate Activity
New Passenger Car
Exports and Production Business Sentiment
Registrations
DI ("favorable"-"unfavorable"), % points
s.a., CY 2015 = 100
s.a., ann., mil. units
120
20
5.5
115
10
5.0
110
105 0
4.5
"Favorable"
100
-10
4.0
95
"Unfavorable"
90 -20
3.5
Industrial production
Manufacturing
85
-30
3.0
Real exports Nonmanufacturing
80
75 -40
2.5
CY 12 14 16 18 20 22 12 14 16 18 20 22
CY 12 14 16 18 20 22 CY
Notes: 1. In the left-hand chart, the figure for industrial production for 2022/Q2 is the April-May average.
2. In the middle chart, figures include small cars with engine sizes up to 660cc.
3. In the right-hand chart, figures are based on the business conditions DI in the Tankan. All enterprises.
Sources: Ministry of Economy, Trade and Industry; Bank of Japan; Japan Automobile Dealers Association; Japan Light Motor Vehicle and Motorcycle Association.
Pent-Up Demand and Labor Market Conditions
Private Consumption and
Employee Income
Disposable Income
y/y % chg.
s.a., CY 2015 = 100
4
120
3
115
2
110
1
105
0
100
-1
95
-2
90
Total cash earnings
Consumption Activity Index
Number of employees
(travel balance adjusted, real)
85 -3
Employee income
Disposable income, etc. (SNA, real)
Real employee income
80 -4
12 14 16 18 20 22 12/Q1 14/Q1 16/Q1 18/Q1 20/Q1 22/Q1
CY
Notes: 1. In the left-hand chart, figures for the Consumption Activity Index (CAI) are based on staff calculations. The CAI figures (travel balance adjusted) exclude inbound tourism
consumption and include outbound tourism consumption. The figure for 2022/Q2 is the April-May average. "Disposable income, etc." consists of disposable income and adjustment
for the change in pension entitlements. Real values are obtained using the deflator of consumption of households.
2. In the right-hand chart, Q1 = March-May, Q2 = June-August, Q3 = September-November, Q4 = December-February. Employee income = Total cash earnings (Monthly Labour
Survey) × Number of employees (Labour Force Survey). Figures from 2016/Q1 onward are based on continuing observations following the sample revisions of the Monthly Labour
Survey. Figures for real employee income are based on staff calculations using the CPI (less imputed rent).
Sources: Bank of Japan; Cabinet Office; Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications.
3
Chart 4
I. Economic Developments
Corporate Profits and Business Fixed Investment
Planned and Actual
Current Profits
Business Fixed Investment (Tankan)
tril. yen
y/y % chg.
90
20
Plan for FY 2022:
Actual
+13.5% from FY 2021
15
80
Planned investment in current
fiscal year as of the June survey of each year
10
70
5
60
0
50
-5
40
-10
30
-15
-20
20
FY FY 07 09 11 13 15 17 19 21
07 09 11 13 15 17 19 21
Notes: 1. In the left-hand chart, figures are based on the Financial Statements Statistics of Corporations by Industry, Quarterly. Excluding "finance and insurance." Figures from fiscal 2009
onward exclude pure holding companies.
2. In the right-hand chart, figures include software and R&D investments and exclude land purchasing expenses. R&D investment is not included before the March 2017 survey. The
figures are for all industries including financial institutions.
Sources: Ministry of Finance; Bank of Japan.
The Bank's Forecasts for Real GDP
(July 2022 Outlook Report)
s.a., ann., tril. yen
580
570
560
550
540
530
520
510
500
y/y % chg.
490
FY 2021 FY 2022 FY 2023 FY 2024
480
+2.4 +2.0 +1.3
July forecasts
Actual
+2.2
470
Apr. forecasts +2.9 +1.9 +1.1
460
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Note: The real GDP growth rates for fiscal 2022-2024 are the medians of the Policy Board members' forecasts. The values of real GDP for fiscal 2022 onward are calculated by multiplying
the actual figure for fiscal 2021 by all successive projected growth rates for each year.
Sources: Cabinet Office; Bank of Japan.
5
Chart 6
I. Economic Developments
Developments in the Overseas Economy
(IMF's July 2022 WEO Update)
Major Economies′ Growth Rates
Global Growth Rate
y/y % chg., % points
y/y % chg.
CY 2022 CY 2023
CY 2020 CY 2021
7
[Forecast] [Forecast]
IMF forecasts
-3.1 6.1 3.2 2.9
6
World
(-0.4) (-0.7)
5
Advanced
-4.5 5.2 2.5 1.4
economies
(-0.8) (-1.0)
4
1.0
-3.4 5.7 2.3
United States
3
(-1.4) (-1.3)
-6.3 5.4 2.6 1.2
2 Euro area
(-0.2) (-1.1)
CY 1990-2019
1 -9.3 7.4 3.2 0.5
average: +3.6%
United Kingdom
(-0.5) (-0.7)
0
1.7
-4.5 1.7 1.7
Japan
(-0.7) (-0.6)
-1
Emerging market and
-2.0 6.8 3.6 3.9
-2 developing economies
(-0.2) (-0.5)
4.6
2.2 8.1 3.3
-3
China
(-1.1) (-0.5)
-4
-6.6 8.7 7.4 6.1
India
(-0.8) (-0.8)
-5
5.1
-3.4 3.4 5.3
ASEAN-5
(0.0) (-0.8)
-6
CY 00 02 04 06 08 10 12 14 16 18 20 22
Chart 7
II. Price Developments
The Bank's Forecasts for the CPI
(July 2022 Outlook Report)
y/y % chg.
3
All items less fresh food
June 2022
All items less fresh food and energy
+2.2%
2
All items less food and energy
1 +1.0%
+0.2%
0
-1
FY 2022 FY 2023 FY 2024
All items
+2.3 +1.4 +1.3
-2
less fresh food
All items
+1.3 +1.4 +1.5
less fresh food and energy
-3
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
Note: The projected rates of increase in the CPI for fiscal 2022-2024 are the medians of the Policy Board members' forecasts. Figures exclude the effects of the consumption tax hikes.
Sources: Ministry of Internal Affairs and Communications; Bank of Japan.
7
Chart 8
III. The Bank's Conduct of Monetary Policy
Level of Economic Activity in Japan and Outflow of Income
Real GDP of Japan, the U.S., and
Import Values of Crude Oil, Etc.
the Euro Area
2022/Q2 ratio to nominal GDP, %
s.a., CY 2019 = 100 s.a., tril. yen
105
10 7
103.2
Other (left scale)
9
Coal (left scale)
6
100.9
8
LNG (left scale)
100
Petroleum (left scale) 5
7
Ratio to nominal GDP
98.2
6
(right scale)
4
95
5
3
4
Japan
3
2
90 United States
2
Euro area 1
1
85
0 0
CY 19 20 21 22
CY 10 12 14 16 18 20 22
Notes: 1. In the left-hand chart, the figures for 2022/Q2 for Japan, the United States, and the euro area are calculated using the ESP Forecast of the Japan Center for Economic Research
(survey period: June 30-July 7), GDPNow by the Atlanta Fed (as of July 19), and the Summer 2022 Economic Forecast by the European Commission (published on July 14),
respectively.
2. In the right-hand chart, figures are the import values of mineral fuels. The ratio to nominal GDP for 2022/Q2 is obtained by using the nominal GDP for 2022/Q1.
Sources: Cabinet Office; Haver; Japan Center for Economic Research; Atlanta Fed; European Commission; Ministry of Finance.
Chart 9
III. The Bank's Conduct of Monetary Policy
Real Interest Rates
Synthesized Inflation Expectations
Nominal Interest Rates
Indicator
%
y/y % chg.
4.0
1.6
Japan
3.5
1.4
United States
3.0
1.2
2.5 Germany
1.0
2.0
1.5
0.8
1.0
0.6
0.5
0.4
0.0
0.2
-0.5
-1.0
0.0
Jan. Jan. Apr.
Apr. July Oct. July
CY 07 09 11 13 15 17 19 21
21 22
Note: In the right-hand chart, figures are obtained by synthesizing the inflation expectations of firms, households, and experts. Those inflation expectations are taken from the Tankan for firms,
the Opinion Survey on the General Public's Views and Behavior for households, and the QUICK Survey for experts.
Sources: Bloomberg; Bank of Japan; QUICK, "QUICK Monthly Market Survey <Bonds>."
9
Chart 10
III. The Bank's Conduct of Monetary Policy
Wages and Prices
Wages and Prices
Base Pay Increases and Summer Bonuses
Revision of Wages
Quarterly
Annual
(Compiled by RENGO)
y/y % chg. y/y % chg.
%
6
6
FY 2019 FY 2020 FY 2021 FY 2022
CPI (less fresh food)
5 5
Rate of wage increase
2.1 1.9 1.8 2.1
Nominal wages
(including regular wages)
(full-time employees)
4 4
Base pay increase
0.6 0.5 0.6 0.6
(groups that can be aggregated)
3 3
Small firms: +0.7%
2 2
1 1
Bonuses (Survey for Large Firms)
y/y % chg.
0 0
2020 2020 2021 2021 2022
Summer Winter Summer Winter Summer
-1
-1
Japan Business
-2.2 -9.0 -8.3 -5.2 13.8
Federation (Keidanren )
-2 -2
Nikkei Inc.
-5.4 -8.6 -2.9 0.8 10.5
-3 -3
Manufacturing : +11.8%
FY 85 90 95 00 05 10 15 20 19/Q1 21/Q1
Nonmanufacturing: +6.7%
Note: In the left-hand chart, figures for nominal wages prior to fiscal 1994 include part-time employees. Those for fiscal 2016 onward a