Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Business Leaders in Wakayama
Hitoshi Suzuki
Member of the Policy Board
I. Recent Economic and Price Developments
A. Overseas Economies
I would like to begin my speech by talking about overseas economies.
Overseas economies have continued to grow at a moderate pace on the whole in a situation
where an improving trend in the business sentiment of manufacturing firms has been
strengthening further on a global basis.
The U.S. economy has continued to recover firmly, mainly in household spending, owing to
a steady improvement in the employment and income situation. Private consumption and
housing investment have been on a moderate increasing trend, partly supported by this
favorable employment and income situation. In terms of the outlook, the U.S. economy is
expected to continue to see firm growth driven by domestic private demand.
The European economy as a whole also has continued to recover steadily in a situation
where private consumption has been on an increasing trend, partly supported by
improvements in the labor market and consumer sentiment, and firms' production activity
has been solid. As for the outlook, the European economy is expected to continue its
moderate recovery, while uncertainty -- for example, over political issues such as those
regarding negotiations on the United Kingdom's exit from the European Union (EU) -- is
likely to weigh on its activity.
The Chinese economy has continued to see stable growth on the whole, partly due to the
effects of authorities' measures to support economic activity, amid an uptrend in exports. As
for the outlook, the economy is likely to broadly follow a stable growth path as authorities
conduct fiscal and monetary policy in a timely manner.
Emerging economies other than China and commodity-exporting economies as a whole
have been recovering moderately, due mainly to the increase in exports and the effects of
the economic stimulus measures of these economies. Their growth rates are likely to
increase gradually, due mainly to the effects of the economic stimulus measures and the
spread of the effects of steady growth in advanced economies.
According to the January 2018 World Economic Outlook (WEO) Update released by the
International Monetary Fund (IMF), global growth is projected to be 3.9 percent in 2018,
exceeding the estimate for 2017 of 3.7 percent (Chart 1). Together with high stock prices
worldwide, the economy could deviate upward from the baseline scenario depending on the
developments in fiscal and monetary policies and structural reforms in each country.
However, due attention should be paid to factors that could exert downside risks to
economic activity, such as (1) the U.S. economic policies and their impact on global
financial markets, (2) developments in emerging and commodity-exporting economies, (3)
negotiations on the United Kingdom's exit from the EU and their effects, and (4)
geopolitical risks. I consider it important to also focus on the following: the fact that spreads
for U.S. high-yield bonds have narrowed in the U.S. economy to a level close to that seen
right before the global financial crisis in 2008; the fact that stock prices, which had been on
an uptrend, fell sharply in early February by more than the decline seen in a day at times
during the global financial crisis in 2008; and how U.S. long-term interest rates and capital
flows to emerging and commodity-exporting economies are affected by moves toward
normalization of monetary policy in the United States and Europe. Moreover, developments
in commodity prices -- including crude oil prices, which have continued to increase -- also
could be risks to the outlook (Chart 2). This is because excessive rises in commodity prices
could lead to a rise in firms' expenses for materials, while sudden drops may bring about
market turmoil.
B. Current Situation and Outlook of Japan's Economy
I will now discuss the economic situation in Japan. Japan's economy is expanding
moderately, with a virtuous cycle from income to spending operating. Reflecting
developments in firms' exports and business fixed investment, the real GDP growth rate for
the July-September quarter of 2017 was 2.5 percent on an annualized quarter-on-quarter
basis, representing positive growth for seven consecutive quarters (Chart 3). This is a level
above Japan's potential growth rate, which is estimated to be in the range of 0.5-1.0 percent.
As the background to these developments, we can point to the fact that real exports have
been on an increasing trend on the back of the growth in overseas economies and business
fixed investment has continued on an increasing trend with corporate profits and business
sentiment improving (Charts 4 and 5). Owing to steady improvement in the employment
and income situation, private consumption also has been increasing moderately, albeit with
fluctuations. According to the Regional Economic Report released by the Bank of Japan in
January 2018, out of a total of nine regions across Japan, six regions, including the Kinki
region, reported that their economy had been expanding or expanding moderately. In
particular, the Kinki region -- of which Wakayama Prefecture is part -- revised up its
assessment based on the strengthened momentum in exports and the improvement in private
consumption, marking three consecutive quarters of upward revisions since July 2017
(Chart 6).
With Japan's economic expansion, supply-demand conditions in the labor market have
tightened steadily. Firms' perception of labor shortage suggested by the diffusion indexes
(DIs) for the employment conditions in the December 2017 Tankan (Short-Term Economic
Survey of Enterprises in Japan) has heightened in a wide range of industries, and the
unemployment rate has been in the range of 2.5-3.0 percent. The active job
openings-to-applicants ratio is at its highest level since 1974, and the ratio for full-time
workers has recorded a historical high (Chart 7). Against this backdrop, labor-saving
investment has increased in a wide range of industries with a view toward using artificial
intelligence (AI), robotic process automation (RPA), and other means. Some are concerned
that, if the use of AI and RPA increases, labor positions would be taken over by robots and
machines, thereby easing labor market conditions. Viewed from a long-term perspective,
however, given that Japan's population is expected to decline, the labor force, which has
continued to increase, may peak out. Moreover, since firms are likely to be in need of new
employees to provide new products and services brought about through innovation and to
make up for a reduction in work hours under working-style reforms, there is a good chance
that labor market conditions could tighten.
With regard to the outlook, Japan's economy is likely to continue its moderate expansion.
Through fiscal 2018, domestic demand is likely to follow an uptrend, with a virtuous cycle
from income to spending being maintained in both the corporate and household sectors, on
the back of highly accommodative financial conditions and underpinnings through the
government's past stimulus measures. Business fixed investment is likely to continue
increasing, supported by firms' heightened growth expectations and increases in Olympic
Games-related investment, as well as in labor-saving investment to address labor shortages.
Private consumption is also expected to follow a moderate increasing trend as the
employment and income situation continues to improve. Moreover, exports are expected to
continue their moderate increasing trend on the back of the growth in overseas economies.
In fiscal 2019, although business fixed investment is likely to decelerate -- mainly reflecting
cyclical adjustments in capital stock as well as Olympic Games-related demand peaking out
-- and household spending is likely to decline in the second half of the fiscal year due to the
effects of the scheduled consumption tax hike, Japan's economy is expected to continue
expanding, supported in part by the increase in exports led by external demand. According
to the Bank's January 2018 Outlook for Economic Activity and Prices (hereafter the Outlook
Report), the medians of the Policy Board members' forecasts of the real GDP growth rate
are 1.9 percent for fiscal 2017, 1.4 percent for fiscal 2018, and 0.7 percent for fiscal 2019
(Chart 8).
C. Current Situation and Outlook of Prices
Turning to price developments, the year-on-year rate of change in the consumer price index
(CPI) for all items less fresh food is currently 0.9 percent. The rate has been on an
improving trend, although gradual, since January 2017, when it started to increase. During
the 12 months since then, the rate rose by more than 1 percentage point (Chart 9).
I believe that there are three factors to consider when projecting the outlook for prices. The
first is the output gap, which determines future inflation rates. The output gap has widened
steadily within positive territory on the back of the steady tightening of labor market
conditions and a rise in capital utilization rates (Chart 10). In this situation, firms' moves to
raise their employees' wages and prices have started to be seen. Furthermore, upward
pressure on prices is heightening steadily. Specifically, labor market conditions have been
tightening further in a wide range of industries -- as evidenced by the medical and nursing
service industry, for example, where labor shortage has become more severe amid an
increase in job openings resulting from large firms entering the market -- and hourly cash
earnings of part-time employees in particular have started to increase. Against this backdrop,
in the service industry, such as dining-out and transportation, some firms have started to
raise prices since the second half of 2017 by passing a rise in labor costs -- arising from
labor shortage -- on to prices.
The second factor is medium- to long-term inflation expectations, which are more or less
unchanged, after having remained in a weakening phase since summer 2015 (Chart 11).
Going forward, with the improvement in the output gap, firms' stance is likely to gradually
shift toward raising wages and prices and is expected to push up the observed inflation rate,
as I mentioned earlier. In this way, inflation expectations are likely to rise through the
adaptive component, in which expectations are formed in a backward-looking manner. In
addition, medium- to long-term inflation expectations are likely to be raised in particular by
the forward-looking component, which will be in place, as the Bank pursues monetary
easing through its strong commitment to achieving the price stability target.
The third factor is import prices. The effect of a pick-up in crude oil prices since spring
2016 is likely to wane moderately, while the yen's depreciation since autumn 2016 is likely
to increase upward pressure on prices for the time being.
In this regard, I think it will take some time to achieve the price stability target, although
this seems to be on track so far; favorable conditions for prices to rise at a faster pace going
forward are beginning to materialize. Therefore, the year-on-year rate of increase in the CPI
(all items less fresh food) is projected to continue on an uptrend and will likely reach
around 2 percent around fiscal 2019. Specifically, the medians of the Policy Board
members' forecasts of the year-on-year rate of change in the CPI (all items less fresh food)
presented in the January 2018 Outlook Report are 0.8 percent for fiscal 2017, 1.4 percent
for fiscal 2018, and, excluding the direct effects of the scheduled consumption tax hike, 1.8
percent for fiscal 2019 (Chart 8).
Nevertheless, what warrants attention is developments in the CPI for all items less fresh
food and energy, which is essential to the year-on-year rate of increase in the CPI for all
items less fresh food rising further toward the price stability target going forward. With that
being said, since there may be some time lag until the effects of labor shortages and the hike
in expenses for materials will be reflected in prices of goods and services provided by firms
more widely across industries, I will continue to pay close attention to firms' actions toward
raising prices of goods and services.
II. Conduct of Monetary Policy
A. Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control
Let me now turn to the Bank's monetary policy. In April 2013, the Bank introduced QQE to
overcome deflation that had lasted for nearly 15 years. In September 2016, from the
viewpoint of further strengthening the effects of monetary easing, it introduced a new
policy framework of QQE with Yield Curve Control -- consisting of yield curve control, in
which the Bank controls short- and long-term interest rates, and an inflation-overshooting
commitment.
The new policy framework has two key features. The first is to facilitate the formation of
the yield curve that is considered most appropriate for achieving the price stability target of
2 percent. With yield curve control, the Bank seeks a decline in real interest rates by
controlling short- and long-term interest rates in a situation where QQE has brought about
positive effects on economic activity and prices mainly through the decline in real interest
rates. In theory, the new framework aims to lower the observed real interest rates -- which
are obtained by subtracting inflation expectations from the nominal interest rates -- to levels
below the natural rate of interest, which is the real interest rate at which the economy
neither accelerates nor decelerates. The basic mechanism is that, when the observed real
interest rates are lower than the natural rate of interest, this stimulates economic activity,
leading to acceleration of economic growth; as the output gap improves, upward pressure
on prices is generated.
Second, as another means of lowering the observed real interest rates, the
inflation-overshooting commitment, under which the Bank works on people's expectations
to increase inflation expectations, is also important. The Bank aims to push up inflation
expectations and further strengthen the effects of monetary easing by making a strong
commitment to expanding the monetary base until the year-on-year rate of increase in the
observed CPI exceeds 2 percent and stays above that level in a stable manner.
B. Effects of Monetary Easing
Since the introduction of QQE with Yield Curve Control, the year-on-year rate of change in
the CPI for all items less fresh food -- which had declined to minus 0.5 percent in
September 2016 -- rose nearly 1.5 percentage points to 0.9 percent in November 2017.
Short- and long-term interest rates also have thus far been maintained at levels consistent
with the Bank's guideline for market operations. In addition, the sustainability of its policy
framework has increased, in that the amount of the Bank's JGB purchases varies flexibly
according to financial market conditions at the time. With regard to inflation expectations,
the results of the 72nd Opinion Survey on the General Public's Views and Behavior
(December 2017 Survey) released by the Bank in January 2018 suggests that monetary
easing has started to influence people's inflation expectations; the proportions of
respondents who answered that prices would go up one year from now and over the next
five years increased compared to the previous survey conducted in September 2017 (Chart
12).
Although the inflation rate has been rising since the introduction of QQE with Yield Curve
Control, there is still some way to go to achieving the price stability target. Let me note,
however, that Japan's economy has been expanding firmly. The conditions of a further rise
in prices are also beginning to materialize, judging from (1) the rise in prices of goods
traded among firms, reflecting increases in commodity prices such as crude oil prices, (2)
the tightening of labor market conditions, and (3) the government's various efforts toward
improving firms' productivity and increasing wages. Thus, I consider that the momentum
toward achieving the price stability target is maintained. Given this situation, I believe that
it is important to persistently maintain powerful monetary easing under QQE with Yield
Curve Control.
C. Regarding Future Conduct of Monetary Policy
Based on the objectives of monetary policy and its effects that I have outlined so far, let me
now discuss two points regarding the future conduct of such policy that warrant attention.
First, while a situation where prices do not rise easily persists, the following achievements
are confirmed: the real GDP growth rate registered positive growth for seven consecutive
quarters, and the Financial Statements Statistics of Corporations by Industry (FSSC)
released by the Ministry of Finance showed that current profits reached a record high level
and that internal reserves for nonfinancial corporations for fiscal 2016 reached a historical
high exceeding 406 trillion yen (Chart 13). Nevertheless, the ratios of investments and
personnel expenses to corporate profits have remained low, and I believe that increasing the
proportion of firms' on-hand liquidity to be spent for future business fixed investment,
research and development, and employees' wages will lead to a rise in wages and prices
(Chart 14). The same could be said for individuals. Many people have saved money because
of anxiety over issues such as a possible decline in the receipt of pension benefits and an
increasing burden of medical expenses in the future. I also hear that, amid the recent stock
price hike, gains on stock sales have accumulated as bank deposits. If these funds were used
for private consumption, owing to an improvement in the employment and income situation,
corporate profits would be pushed up further and an economic virtuous cycle would operate.
To address this situation, on December 8, 2017, the Cabinet decided the New Economic
Policy Package, which placed "Supply System Innovation" and "Human Resources
Development" as major pillars. The government has laid out measures such as providing
preferential tax treatment for firms that have raised wages. I consider that these measures by
the government, coupled with the Bank's monetary easing, will play an important role in
realizing an economy in which the virtuous cycle operates firmly.
Second, as I mentioned earlier, short- and long-term interest rates have been maintained at
levels consistent with the Bank's guideline for market operations for more than a year since
the introduction of QQE with Yield Curve Control in September 2016. However, looking
back at the aftermath of Black Monday in 1987 and the global financial crisis in 2008,
during which I worked as a market practitioner, the market is volatile by nature, much like a
living creature; therefore, close attention should continue to be paid to the effects of the
current large-scale monetary easing on developments in economic activity and prices, as
well as financial conditions. In particular, I focus on the effects imposed on (1) yields on
securities held by financial institutions and their lending rates, (2) developments in
corporate bond rates and flow of funds between firms and investors based on these rates,
and (3) investments by insurance companies and pension funds. In a situation where firms
find it easier to raise funds under a low interest rate environment, financial institutions have
been taking an active lending stance, and the amount outstanding of bank loans has in fact
been increasing (Chart 15). Meanwhile, financial institutions' earnings have been reduced,
due in part to a further decline in lending rates brought about by intensifying competition
among banks and to a decline in yields on securities held by financial institutions. At least
for now, I believe that financial institutions in Japan as a whole have robust resilience
against stress in terms of both capital and liquidity, and stability in the financial system has
been maintained. However, it is necessary to carefully monitor how monetary policy will
affect the financial system and the financial intermediation function, including the
cumulative effects stemming from sustaining the Bank's large-scale monetary easing.
Moreover, in facilitating the formation of an appropriate yield curve, the Bank should take
account of economic, price, and financial conditions, as was indicated when QQE with
Yield Curve Control was introduced in September 2016.
Thank you very much for your attention.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Business Leaders in Wakayama
February 8, 2018
Hitoshi Suzuki
Bank of Japan
Chart 1
Global Economy
IMF Projections (as of January 2018) Real GDP Growth Rate of the World Economy
real GDP growth rate, y/y % chg. y/y % chg.
6
2017 2018 2019
CY 2016
estimates projection projection
IMF
Avg. growth rate (1980-2017): +3.5%
3.9 3.9 projections
5
World
3.2 3.7
(0.2) (0.2)
2.3 2.2
Advanced economies 1.7 2.3
(0.3) (0.4)
4
2.7 2.5
United States 1.5 2.3
(0.4) (0.6)
2.2 2.0
Euro area 1.8 2.4
3
(0.3) (0.3)
1.5 1.5
United Kingdom 1.9 1.7
(0.0) (-0.1)
1.2 0.9 2
Japan
0.9 1.8
(0.5) (0.1)
4.9 5.0
Emerging market and
4.4 4.7
developing economies
(0.0) (0.0)
1
Emerging and developing 6.5 6.6
6.4 6.5
Asia
(0.0) (0.1)
6.6 6.4
China 6.7 6.8 0
(0.1) (0.1)
5.3 5.3 Emerging market and developing economies
ASEAN 4.9 5.3
(0.1) (0.0)
Advanced economies
-1
1.7 1.5
Russia -0.2 1.8
World economy
(0.1) (0.0)
1.9 2.6
Latin America and the
-0.7 1.3
Caribbean
(0.0) (0.2) -2
CY 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Source: International Monetary Fund.
Note: Figures in parentheses are the difference from the October 2017
Source: International Monetary Fund.
projections.
World Economic Outlook
Note: As of January 2018. Figures are calculated using GDP based on
purchasing power parity (PPP) shares of the world total from the
International Monetary Fund.
Chart 2
International Commodity Prices
oil: $/bbl, copper: 100 $/t, monthly avg.
150
120
90
60
30
ドバイ・原油 銅
Crude oil (Dubai) Copper
0
CY
01 03 05 07 09 11 13 15 17
Sources: Nikkei Inc.; Bloomberg.
Chart 3
Japan's Economy: Real GDP
s.a., q/q % chg.
s.a., ann., q/q % chg. s.a., tril. yen
2016 2017
Real GDP (nominal, right scale)
3Q 4Q 1Q 2Q 3Q
Real GDP 0.2 0.3 0.4 0.7 0.6
[ann., q/q] [0.9] [1.4] [1.5] [2.9] [2.5]
Private Consumption 0.4 0.1 0.4 0.9 -0.5
Private Non-Resi. Investment -0.2 1.5 0.2 1.2 1.1
Real GDP growth rate
(left scale)
Private Residential Investment 3.0 0.2 0.9 1.3 -1.0
Public Demand 0.4 -0.7 0.2 1.1 -0.5
Exports of Goods & Services 2.1 3.0 1.9 -0.1 1.5
Chart 4
Exports and Corporate Profits
Real Exports and Real Imports
Corporate Profits
s.a., CY 2015=100 s.a., %
7
Real exports
Ratio of current profits to sales
売上高経常利益率
6
売上高営業利益率 Ratio of operating profits to sales
5
4
3
Real imports
2
1
0
CY CY
01 03 05 07 09 11 13 15 17
Source: Bank of Japan. Source: Ministry of Finance.
Note: Based on the "Financial Statements Statistics of Corporations
by Industry, Quarterly." Excluding "finance and insurance."
Chart 5
Business Fixed Investment
Investment-GDP Ratio (Nominal)
s.a., %
17
16
15
Average of investment-GDP
ratio from 1994
14
13
94 96 98 00 02 04 06 08 10 12 14 16
CY
Chart 6
Regional Economic Assessments
Comparison of Previous and Current Assessments by Region (Regional Economic Report)
Changes
Region Assessment in October 2017 Assessment in January 2018
from the
previous
assessment
Hokkaido The economy has been recovering. The economy has been recovering.
Tohoku The economy has continued its The economy has continued to recover
moderate recovery trend. moderately.
Hokuriku The economy has been expanding The economy has been expanding.
moderately.
The economy has been expanding The economy has been expanding moderately.
KantoKoshinetsu moderately.
Tokai The economy has been expanding. The economy has been expanding.
Kinki The economy has been expanding The economy has been expanding moderately,
moderately. with its growth becoming more solid.
Chugoku The economy has been expanding The economy has been expanding moderately.
moderately.
Shikoku The economy has continued to recover The economy has continued to recover
moderately. moderately.
The economy has been expanding The economy has been expanding moderately.
KyushuOkinawa moderately.
Source: Bank of Japan.
Chart 7
Labor Market Conditions
Diffusion Index of Employment Conditions
Unemployment Rate and Active Job
(Tankan)
Openings-to-Applicants Ratio
reversed, DI ("Excessive employment" minus "Insufficient employment"),
s.a., ratio s.a., %
% points
Insufficient employment
Unemployment rate (right scale)
Excessive employment
Active job openings-to-applicants
Ratio (left scale)
Active job openings-to-applicants ratio for
full-time employees (left scale)
CY CY
CY
Sources: Ministry of Internal Affairs and Communications;
Source: Bank of Japan.
Ministry of Health, Labour and Welfare.
Chart 8
"Outlook for Economic Activity and Prices"
(January 2018)
Forecasts of the Majority of Policy Board Members
y/y % chg.
Real GDP CPI (all items less fresh food)
+1.8 to +2.0 +0.7 to +1.0
Fiscal 2017
[+1.9] [+0.8]
Forecasts made in +1.7 to +2.0 +0.7 to +1.0
October 2017
[+1.9] [+0.8]
+1.3 to +1.5 +1.3 to +1.6
Fiscal 2018
[+1.4] [+1.4]
+1.2 to +1.4 +1.1 to +1.6
Forecasts made in
October 2017
[+1.4] [+1.4]
+0.7 to +0.9 +1.5 to +2.0
Fiscal 2019
[+0.7] [+1.8]
Forecasts made in +0.7 to +0.8 +1.5 to +2.0
October 2017
[+0.7] [+1.8]
Source: Bank of Japan.
Note: Figures in brackets indicate the medians of the Policy Board members' forecasts (point estimates).
Chart 9
CPI
s.a., y/y % chg.
2.0
1.5
All items less fresh food and energy
1.0
0.5
0.0
▲ 0.5
All items less fresh food
Chart 10
Output Gap
%
1.5
Excess demand
(upward pressure on prices)
1.0
0.5
0.0
▲ 0.5
▲ 1.0
▲ 1.5 Excess supply
(downward pressure on prices)
▲ 2.0
13/1Q 3Q 14/1Q 3Q 15/1Q 3Q 16/1Q 3Q 17/1Q 3Q
Source: Bank of Japan.
Note: Based on staff estimations.
Chart 11
Inflation Expectations (Survey)
y/y, ann. avg., %
2.5
Firms (five years ahead)
2.0
1.5
Households (over the next five years)
1.0
0.5
0.0
CY
05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: Bank of Japan.
Notes: 1. Figures for households are from the Opinion Survey on the General Public's Views and Behavior,
estimated using the modified Carlson-Parkin method.
2. Figures for firms are "Outlook for General Prices (Tankan, all Industries and enterprises, average)."
Chart 12
Outlook for Price Levels
Results of the 72nd
Opinion Survey on the General Public's Views and Behavior
(December 2017 Survey)
%
100
90
"Prices" will go up one year from now
80
70
"Prices" will go up over the next five years
60
20 13/Mar. Sept. 14/Mar. Sept. 15/Mar. Sept. 16/Mar. Sept. 17/Mar. Sept.
Source: Bank of Japan.
Note: Figures for both one year from now and over the next five years comprise the choices "will go up
significantly" and "will go up slightly" that are found in the questionnaire.
Chart 13
Balance Sheet of Nonfinancial Corporations
tril. yen
Cash and deposits
Loans
【200】
Bills and accounts
【300】
receivables
【200】
Corporate bonds Liabilities
【60】 【1,000】
Real assets
Accounts payable and
(including inventories)
accrued expenses, etc.
Assets 【600】
【640】
【1,650】
Capital stock, etc.
【250】
Investments
Net
【450】
assets
【650】
Internal Reserves
Other 【400】
【200】
Chart 14
Investment and Personnel Expenses
Investment
Personnel Expenses
% %
40
90
Investment / (operating cash flows + personnel expenses)
35
85
30
80
25
75
Personnel expenses / (operating cash flows + personnel expenses)
20
70
15
65
10
60
FY 85 90 95 00 05 10 15
FY 85 90 95 00 05 10 15
Source: Ministry of Finance. Source: Ministry of Finance.
Notes: 1. Figures for "operating cash flows," "personnel expenses," Notes: 1. Based on the "Financial Statements Statistics of Corporations
and "investment" are based on the "Financial Statements by Industry, Annually." Excluding "finance and insurance."
Statistics of Corporations by Industry, Annually." Excluding 2. The definition of operating cash flows is the same as in the
"finance and insurance." left chart.
2. Operating cash flows are defined as follows:
Operating cash flows = net income - dividends +
depreciation expenses + Δprovisions - Δinventories - Δtrade
credits - Δnet amount of other current assets.
3. Investment includes land purchasing expenses and excludes
software and R&D investment.
Chart 15
Bank Lending
Amount Outstanding of Bank Loans
Bank Lending Rates
(lending by domestic commercial banks)
y/y % chg. %
10 2.0
1.8
8
Bank lending rates (long-term)
1.6
6
1.4
1.2
4
1.0
2
0.8
0.6
0
0.4
Bank lending rates (short-term)
-2
0.2
-4
0.0
CY 05 06 07 08 09 10 11 12 13 14 15 16 17 05 06 07 08 09 10 11 12 13 14 15 16 17
CY
Source: Bank of Japan.
Source: Bank of Japan.
Note: Figures are year-on-year percent changes in the Note: Figures are 6-month backward moving averages.
monthly average of the amount outstanding.