Japan's Economy and Monetary Policy
Speech at a Meeting with Business Leaders in Oita
Kikuo Iwata
Deputy Governor of the Bank of Japan
Introduction
It is my pleasure to have the opportunity today to exchange views with administrative,
financial, and business leaders in Oita Prefecture. I would also like to take this opportunity
to express my sincere gratitude for your cooperation with the activities of the Bank of
Japan's Oita Branch.
At the Monetary Policy Meeting (MPM) held last week, the Bank updated its projections
for Japan's economic activity and prices through fiscal 2019 and released them in the
January 2018 Outlook for Economic Activity and Prices (Outlook Report). Today, I would
like to talk about the Bank's outlook for Japan's economic activity and prices as well as its
thinking behind the conduct of monetary policy, while outlining the Outlook Report.
I. The Current Situation of Economic Activity and Its Outlook
Let me start by talking about economic developments. Japan's economy is expanding
moderately, with a virtuous cycle from income to spending operating. The real GDP growth
rate for the July-September quarter of 2017 was 2.5 percent on an annualized basis,
representing positive growth for seven consecutive quarters (Chart 1). The benefits of the
economic improvement have been spreading to a wide range of economic entities, and
Tankan
according to the Bank's (Short-Term Economic Survey of Enterprises in Japan)
released in December 2017, the diffusion indexes (DIs) for business conditions have
continued to be positive, not only for large enterprises and manufacturers but also for small
Regional
enterprises and nonmanufacturers. By region, in the Bank's January 2018
Economic
Report, all nine regions across the country, including the Kyushu region, showed
positive economic assessments, using phrases such as moderate recovery and expansion. In
what follows, I would like to talk about the current situation of Japan's economic activity
and its outlook in more detail.
Overseas Economies
I would first like to touch upon developments in overseas economies. Looking back,
overseas economies remained subdued following the global financial crisis in 2008.
However, since around the second half of 2016, the positive effects of economic recovery in
advanced economies have started to spread to emerging economies, and so-called
synchronous growth has been achieved recently, with advanced and emerging economies
growing in tandem. In this situation, production and trade activity of the manufacturing
sector have become active due to the completion of inventory adjustments and an increase
in business fixed investment on a global basis. World trade volume last year registered high
growth that reflected such developments, growing at a faster pace than the global economy
for the first time in six years. The global economy is expected to continue growing firmly
for the time being. According to the January 2018 World Economic Outlook (WEO) Update
released by the International Monetary Fund (IMF), the global GDP growth rates for both
2018 and 2019 are expected to register relatively high growth of 3.9 percent, exceeding the
long-term average since the 1990s (Chart 2).
Current Situation of Japan's Economic Activity
As I noted at the beginning, Japan's economy is expanding moderately, supported in part by
such growth in overseas economies. With regard to the corporate sector, exports have shown
high growth mainly for capital goods and IT-related goods. In particular, exports to China as
well as the NIEs and the ASEAN economies have been rapidly increasing recently, and real
exports for November 2017 reached record high levels, exceeding those seen before the
global financial crisis. Production has also been on an uptrend on the back of a rise in
demand both at home and abroad. Under these circumstances, the ratio of firms' current
profits to sales has been at a record high level, and the DIs for business conditions for all
industries and enterprises in the December 2017 Tankan suggest that business conditions
have improved for six consecutive quarters, being at a favorable level seen for the first time
in 26 years, since 1991. Business fixed investment has continued on an increasing trend in a
wide range of industries, with corporate profits and business sentiment improving (Chart 3).
Specifically, firms in the nonmanufacturing sector in industries such as restaurants, retailing,
and construction have been significantly increasing their labor-saving and
efficiency-improving investment (Chart 4). For instance, the introduction of online
reservation systems and self-checkout machines across the country is no longer a new
phenomenon. While the direct cause of such investment is acute labor shortage, it is also
attributable to new technologies such as robots and artificial intelligence (AI) having
become available for actual business activities as a result of technological innovation in
recent years. For example, there have been various ideas recently related to making use of
the latest technologies, such as using robots for heavy labor at nursing care facilities and
drones for delivery services. Such positive corporate activities also have been firmly
supported by financial institutions' accommodative lending attitudes.
Turning to the household sector, as I mentioned earlier, labor market conditions have
continued to tighten steadily amid economic expansion (Chart 5). The active job
openings-to-applicants ratio for December 2017 improved to 1.59, a level seen for the first
time in about 44 years, since 1974, and the unemployment rate has declined to a level seen
for the first time in about 24 years. In this situation, wages have been rising moderately.
Specifically, the year-on-year rate of increase in hourly wages of part-time employees,
which are sensitive to economic activity, has marked relatively high growth of around 2
percent recently. Although the pace of wage increases for full-time employees has remained
sluggish compared to that for part-time employees, the situation is gradually changing. Base
pay rises returned in 2014, and moves to raise the starting salaries of full-time employees
have been observed at many firms recently, aiming to secure the number of employees
needed. Against the background of such improvement in the employment and income
situation, private consumption has been increasing moderately, albeit with fluctuations
(Chart 6). In detail, durable goods such as automobiles and household electrical appliances
have been on a moderate increasing trend, due mainly to replacement demand, and
nondurable goods such as clothes and food have been picking up recently. The favorable
employment situation, together with the rise in stock prices, has led to an improvement in
consumer sentiment, which also underpins consumption activities.
Outlook for Japan's Economic Activity
Next, I would like to turn to the Bank's outlook for Japan's economic activity. Japan's
economy is likely to continue its moderate expansion. Exports are expected to continue
their moderate increasing trend on the back of the growth in overseas economies, and
business fixed investment and private consumption are likely to follow an increasing trend
on the back of highly accommodative financial conditions and underpinnings through the
government's past stimulus measures. According to the January 2018 Outlook Report, the
medians of the Policy Board members' forecasts of the real GDP growth rates for fiscal
2017 and 2018 are 1.9 percent and 1.4 percent, respectively (Chart 7). These figures are
above Japan's potential growth rate, which is estimated to be in the range of 0.5-1.0 percent.
In fiscal 2019, business fixed investment is likely to decelerate, mainly reflecting Olympic
Games-related demand peaking out, and household spending is likely to turn to a decline in
the second half of the fiscal year due to the effects of the scheduled consumption tax hike.
Although the growth pace is projected to decelerate, the economy is expected to continue
expanding, with the projected real GDP growth rate at 0.7 percent for fiscal 2019, as an
increase in exports on the back of the growth in overseas economies underpins the
economy.
There are, of course, upside and downside risks to this baseline scenario of the outlook for
Japan's economic activity. The biggest risk factor is developments in overseas economies.
Uncertainty surrounding overseas economies seems to have abated compared to a while ago,
as seen in economic recovery in emerging economies clearly taking hold and progress being
made regarding the debt problem for the financial sector in Europe. However, the U.S.
economic policies and negotiations on the United Kingdom's exit from the European Union
(EU) continue to warrant attention. The Bank will continue to closely examine
developments in overseas economies, including geopolitical risks.
II. Price Developments and Their Outlook
Price Developments
Now, I will move on to price developments. The year-on-year rate of change in the
consumer price index (CPI) in Japan has been increasing gradually since around mid-2016,
mainly on the back of a rise in energy prices (Chart 8). The rate of change in the CPI
excluding fresh food registered 0.9 percent in November and December last year, which is
the level last seen in October 2014. With actual inflation rising, people's inflation
expectations shifted from the weakening phase and have been more or less unchanged
recently.
However, excluding the effects of energy prices, the rate of change in the CPI has remained
slightly positive, continuing to show relatively weak developments. While this reflects
temporary factors such as a reduction in charges for mobile phone services, this is mainly
attributable to the fact that the mindset and behavior based on the assumption that wages
and prices will not increase easily have been deeply entrenched among firms and
households. As evidence of such mindset and behavior, firms have been limiting wage
increases -- which correspond to the labor shortage -- mainly to part-time employees, and it
is taking time for such increases to spread to full-time employees. In addition, a wide range
of firms have been making efforts to absorb a rise in labor costs by increasing labor-saving
investment and streamlining their business processes through such measures as
discontinuing late-night services.
Outlook for Prices
As these developments show, prices are relatively weak. Going forward, however, they are
expected to overcome this situation, and the year-on-year rate of change in the CPI is likely
to increase toward the price stability target of 2 percent. This is expected to be realized
through the following mechanism.
First, prices of items such as processed food and daily necessities -- which are responsive to
economic activity -- are likely to rise gradually, and the yen's depreciation to date is
expected to push up prices of such items as durable goods. Second, as the output gap
improves further, firms' stance is likely to gradually shift toward raising wages and prices,
and the inflation rate is projected to rise in line with wage increases. Third, with these
factors pushing up actual inflation, a virtuous cycle is expected to operate in which people's
inflation expectations rise accordingly, leading to a further increase in actual inflation.
Bearing this mechanism in mind, the January 2018 Outlook Report shows that the medians
of the Policy Board members' forecasts of the year-on-year rate of change in the CPI
excluding fresh food are 0.8 percent for fiscal 2017, 1.4 percent for fiscal 2018, and on a
basis excluding the effects of the consumption tax hike, 1.8 percent for fiscal 2019 (Chart
7).
The key to realizing the inflation mechanism that I just outlined is firms' wage- and
price-setting stance. With regard to the price-setting stance, there has been a gradually
increasing number of cases recently where firms reflect in their sales prices the increased
labor costs and input costs. Media reports on price rises seem to have increased
Regional Economic
substantially of late. As mentioned in the Bank's Report, many firms
reported that they have been reaching the limit to which they can undertake labor-saving
investment in order to absorb increasing labor costs.
Regarding the wage-setting stance, in a situation where labor shortage is not showing signs
of being relaxed, but rather is becoming even more acute, an increasing number of firms
seem to be considering raising wages of not only part-time but also full-time employees.
While such an increase in labor costs contributes to pushing up sales prices, if many firms
increase wages, households' income situation will improve and more consumers
consequently will come to accept price rises. If that happens, price rises will not result in
losing customers, likely leading to an increase in sales. As this shows, wage increases by
firms also benefit themselves.
In relation to wage increases, some argue that firms should allocate more of their cash on
hand to their employees (Chart 9). While it is true that corporate savings have accumulated
to a substantial degree lately, there are various backgrounds to this. For example, with
memories of the severe funding conditions during the global financial crisis still fresh, some
firms say that, for the time being, they prefer to accumulate earned cash on hand to be
prepared for any future crisis. Others point to the fact that, even if they invest in capital and
human resources, they cannot gain enough profits as Japan's expected growth rate is low.
However, in a situation where Japan's economy has been improving steadily and is likely to
continue expanding going forward, these do not seem to be the main reasons for the
increase in corporate savings. Rather, it appears that the recent rapid increase in corporate
profits was an unexpected windfall for firms. If that is the case, the savings are likely to be
used for business fixed investment and wage increases with some time lag. While an
increase in fixed investment is preceding so far, the increased savings are likely to lead to
wage growth going forward, as real wages have not been rising in line with labor
productivity.
III. The Bank's Conduct of Monetary Policy
Next, I will talk about the Bank's conduct of monetary policy. The Bank has been
conducting monetary policy under "Quantitative and Qualitative Monetary Easing (QQE)
with Yield Curve Control" since September 2016. This framework consists of two
components (Chart 10).
The first is an inflation-overshooting commitment. This is the Bank's strong commitment
that it will continue expanding the monetary base until the year-on-year rate of increase in
the actual CPI exceeds 2 percent and stays above that level in a stable manner. It is crucial
that people actually experience inflation above 2 percent and thereby the perception takes
hold among them that prices of goods and services tend to go up every year by around 2
percent. With this in mind, the Bank, under the inflation-overshooting commitment, has
committed itself to continuing with large-scale monetary easing until such situation is
achieved.
The second component is yield curve control. The Bank facilitates the formation of the
yield curve that is considered most appropriate for achieving the price stability target of 2
percent, taking account of developments in Japan's economic activity and prices as well as
financial conditions. At present, it sets the short-term policy interest rate at minus 0.1
percent and the target level of the 10-year Japanese government bond (JGB) yields at
around zero percent, conducting JGB purchases so as to achieve this target level.
As I mentioned earlier, Japan's economy is expanding moderately but prices are relatively
weak. Thus, there is still a long way to go to achieve the price stability target of 2 percent.
In light of such recent developments in economic activity and prices as well as financial
conditions, the Bank deems it important to continue to persistently pursue powerful
monetary easing under the framework of "QQE with Yield Curve Control."
While the Bank believes it important to continue with the current monetary easing
persistently, some argue that continuing with monetary easing for a long period entails risks.
In what follows, I would like to express my views on the two risks that have been pointed
out.
The first risk of continuing with the current monetary easing policy is that the efficiency of
Japan's economy would be hampered, due to the continuation of firms' inefficient resource
allocation and to firms with low productivity remaining in place amid funding costs staying
at significantly low levels. However, I instead think that it would be difficult to heighten the
efficiency and dynamism of the economy and thereby raise productivity unless the economy
is underpinned by an appropriate conduct of monetary easing. This is because, under
deflation, strong resistance will arise against the pain -- such as an increase in
unemployment -- that emerges in the course of raising productivity through firms' efforts. In
Japan's economy today, monetary policy has exerted its intended effects, and supply-side
constraints such as shortages of labor and capital have become evident amid an
improvement in the output gap. Given this situation, now is the best opportunity for firms to
promote investment in human resources and capital for the purpose of raising labor
productivity. In the process of raising labor productivity, there usually is a concern of an
increase in unemployment, which is one of the reasons why firms are reluctant to undertake
fixed investment, including in software. Nevertheless, in the situation of the current labor
shortage, there are good chances to change jobs -- enough to absorb the possible increase in
unemployment. In this context, the Bank's current monetary policy can be considered as
contributing to providing the conditions for raising labor productivity. In fact, as I
mentioned earlier, a pronounced increase has been observed in investment aimed at saving
labor and streamlining business processes in industries where labor shortage is acute.
Speaking of raising labor productivity, firms will be more strongly motivated to do so
through creating a competitive environment by abolishing competition-restricting
regulations, including those on market entry and on prices, than through support policies
such as the provision of subsidies for firms. If the government promotes its initiatives
toward enhancing competition, such as abolishment of the so-called bedrock regulations,
many firms are expected to enter the market. In such situation, if more firms take advantage
of accommodative financial conditions, capital investment will be reinforced and
technological innovation will progress, leading the potential growth rate to rise and
monetary easing effects to become larger. As a result, the price stability target of 2 percent
can be achieved earlier than projected. Therefore, I expect that the government's regulatory
and institutional reforms will be pushed forward strongly.
The second risk pointed out is that, if the current monetary easing measures will continue to
be taken, fiscal discipline will loosen and fiscal sustainability will be lost because the
government can issue debt at low interest rates under such circumstances. While fiscal
management is conducted under the responsibility of the government and the Diet, it is
important to secure the market's confidence in medium- to long-term fiscal soundness. In
the joint statement by the government and the Bank of Japan in January 2013, it says that
the government "will steadily promote measures aimed at establishing a sustainable fiscal
structure."
That being said, a combination of accommodative financial conditions provided by the
central bank and fiscal spending proactively carried out by the government is called a
"policy mix," and it is well known as a standard macroeconomic policy that synergy effects
from both sides can produce stronger economic stimulus effects. In Japan, under the Bank's
QQE, the government is to conduct flexible fiscal policy as the second arrow of Abenomics.
In my understanding, what is meant by flexible fiscal policy is that the government will
formulate a supplementary budget beforehand when an economic downturn is expected, and
thereby increase fiscal spending or implement tax reductions.
Then, the issue would be how to reconcile medium- to long-term fiscal soundness and
flexible fiscal policy. In what follows, I would like to present my view on this.
Please take a look at the left-hand panel of Chart 11. This shows the year-on-year rates of
change in the fiscal balance-to-GDP ratio and the primary balance-to-GDP ratio. The higher
the blue and white column graphs go above zero, the larger the reduction in the fiscal
deficit-to-GDP ratio and the primary deficit-to-GDP ratio, or in other words, the faster the
pace of fiscal austerity. From fiscal 2010 to fiscal 2012, the pace of fiscal austerity was
relatively moderate, and the degree of monetary accommodation was not enough.
On the other hand, from fiscal 2013 -- when QQE was introduced -- to fiscal 2015, the pace
of fiscal austerity accelerated. In particular, it surged in fiscal 2014 because the
consumption tax was raised from 5 percent to 8 percent. Even though the government
formulated in that fiscal year economic measures of 5 trillion yen as part of flexible fiscal
policy, the real GDP growth rate declined to minus 0.3 percent.
The pace of fiscal austerity started to slow in fiscal 2015 and decelerated significantly in
fiscal 2016. On the back of that decline, coupled with powerful monetary easing, the real
GDP growth rate has been increasing since fiscal 2015, outpacing the potential growth rate
-- which is estimated to be in the range of 0.5-1.0 percent -- by around 0.5 percentage point.
Please take a look at the right-hand panel of Chart 11. In this panel, the degree of fiscal
soundness is shown by developments in the ratio of the amount outstanding of gross
government debt to nominal GDP, and we can see that the ratio marked the highest figure in
2014 despite the consumption tax hike in April that year.
In order to properly gauge the fiscal conditions, the ratio of the amount outstanding of net
government debt -- calculated by subtracting the amount outstanding of the government's
holdings of financial assets from that of gross government debt -- to nominal GDP also
should be taken into consideration. As with the case of the ratio of the amount outstanding
of gross government debt to nominal GDP, this ratio also rose in 2014, when the
consumption tax hike took place. However, given that it has been more or less flat since
2012, one cannot necessarily say that Japan's fiscal conditions are becoming worse.
In considering the combination of fiscal soundness and monetary easing measures, it would
be effective to look at the experience of the euro area.
Please take a look at Chart 12. This shows the pace of fiscal austerity and economic growth
in the euro area. The pace of fiscal austerity is shown by the annual changes in the
following ratios: the fiscal balance-to-GDP ratio; the primary balance-to-GDP ratio; and the
ratio of structural balance -- calculated by excluding the effects of economic fluctuations
from the actual fiscal balance -- to GDP. As in Chart 11, the higher the column graphs go
above zero, the faster the pace of fiscal austerity.
In the euro area, the economy was under strong downward pressure from 2010 to 2012, not
only because the degree of monetary accommodation was not enough but also because the
pace of fiscal austerity was accelerating. Consequently, the economy experienced negative
growth in 2012 and 2013, and the ratios of the amounts outstanding of both gross and net
government debt to nominal GDP rose, even though the governments continued with fiscal
austerity.
Through such experience, in 2013, the governments in the euro area started to shift their
policy to where the pace of fiscal austerity was slowed. Against this background, monetary
policy to increase the degree of monetary accommodation also was introduced successively,
and quantitative easing (QE) was introduced in 2015. At one point, a concern arose that the
euro area might fall into deflation, just as in the case of Japan. However, the combination of
such fiscal and monetary policy worked well and, since 2014, the euro area economy has
recovered and its growth rate has been on an uptrend. The ratios of the amounts outstanding
of both gross and net government debt to nominal GDP have continued to decline, albeit
moderately, even though the governments slowed the pace of fiscal austerity.
Although it is important to achieve fiscal soundness in the medium to long run, the pace of
achievement -- or in other words, the pace of fiscal austerity -- affects the real economy
largely. If the government rushes to achieve fiscal soundness and accelerates the pace of
fiscal austerity, the growth rate will decline. If this happens, fiscal soundness will not be
achieved, and achievement of the price stability target of 2 percent also will become
difficult.
It has been nearly five years since the introduction of QQE in April 2013. In concluding my
speech, let me express my view on economic and price developments, as well as policy
effects over the past five years.
First, during the five years since the introduction of QQE, Japan's economic and price
developments have improved significantly, and the economy is no longer in deflation,
which is generally defined as a sustained decline in prices. Through the implementation of
large-scale monetary easing under the strong and clear commitment toward achieving the
price stability target of 2 percent, people's basic view on monetary policy has changed
drastically, bringing about a rise in inflation expectations and a decline in nominal interest
rates across the entire yield curve. Triggered by the decline in real interest rates, excessive
yen appreciation has been corrected and stock prices have risen significantly. On the real
economy side, the output gap has improved and the employment situation has done so to a
substantial degree.
Second, despite these improvements, we are only halfway to achieving the price stability
target of 2 percent. I think the main reason for this is as follows: the observed inflation rates
started to decline before inflation expectations anchored at 2 percent, due mainly to the
consumption tax hike and the significant decline in crude oil prices, and this led inflation
expectations, of which formation has been largely adaptive, to become relatively weak. In
this situation, in order to achieve the price stability target of 2 percent, it is necessary to
raise the observed inflation rates through an improvement in the output gap, which will be
brought about by continuing with monetary easing persistently, and thereby lift inflation
expectations. "QQE with Yield Curve Control" that the Bank currently adopts incorporates
the mechanism in which the price stability target of 2 percent can be achieved through
raising inflation expectations -- although it may take some time -- by maintaining nominal
interest rates at low levels. This is the most appropriate monetary policy framework at
present, in that it has the largest positive effects and the smallest side effects. The Bank
must keep seeking whether there is more appropriate monetary policy, but unless the
effectiveness of a new policy is assured, I think it should continue with the current monetary
policy.
Third, in addition to an appropriate monetary easing policy, the government's initiatives are
important in order to achieve sustainable economic growth under price stability. With a
view to achieving further growth in Japan's economy, I strongly expect that the government
will set an appropriate pace for fiscal austerity, as I described earlier, and that it will carry
out growth strategy -- such as competition policy -- appropriately and powerfully. In
addition, under the current economic situation where the increase in income is sluggish and
consumption has not gained enough momentum, an income shift -- through an income
reallocation policy -- to households with a high propensity to consume is also effective. On
this point, the government set out measures to support child rearing and education including
the provision of early childcare as well as higher education for free, as part of the "human
resources development revolution" in the New Economic Policy Package. This is an
effective macroeconomic policy that can expand domestic demand led by consumption,
through properly combining the tax system and fiscal spending and making sure the pace of
fiscal austerity is appropriate.
With these initiatives becoming effective, I hope that Japan's economy will achieve higher
growth in real terms in the near future under the stable inflation rate of around 2 percent.
Conclusion
Since 2016, several natural disasters -- the Kumamoto Earthquake, the torrential rain in
Northern Kyushu, and the 18th typhoon in 2017 -- hit Oita Prefecture and caused damage to
its tourism and agriculture. I would like to offer my heartfelt sympathies to those who
suffered, and I deeply respect the efforts by people in the region who faced difficulties.
In Oita Prefecture, big events are scheduled to take place this year, such as the International
ONSEN Summit and the "National Cultural Festival and the National Disabled Craft and
Culture Festival." In addition, the Rugby World Cup is to be held next year. I would like to
close my speech by expressing my sincere hope that, through these opportunities, the public
and private sectors will work together on vitalizing the local economy in various fields, and
that the local economy will be strongly revived after the massive disasters.
Thank you very much for your attention.
Japan's Economy and Monetary Policy
Speech at a Meeting with Business Leaders in Oita
January 31, 2018
Kikuo Iwata
Chart 1
Real GDP
s.a., ann., tril. yen
540
530
520
510
500
490
480
470
460
CY 06 07 08 09 10 11 12 13 14 15 16 17
Chart 2
Global Economy
Projections of Real GDP Growth
Global Real GDP Growth
by Major Economies (as of January 2018)
y/y % chg.
y/y % chg.
6
2018 2019
2016 2017
[Projection] [Projection]
World output
CY 2018: +3.9%
5
3.9 3.9
2019: +3.9%
World
3.2 3.7
(+0.2) (+0.2)
2.3 2.2
4
Advanced economies
1.7 2.3
(+0.3) (+0.4)
2.7 2.5
United States
1.5 2.3
3
IMF
(+0.4) (+0.6)
projection
2.2 2.0
Euro area
1.8 2.4
(+0.3) (+0.3)
2
CY 1990-2017 average: +3.6%
1.2 0.9
Japan
0.9 1.8
(+0.5) (+0.1)
1
Emerging market and 4.9 5.0
4.4 4.7
developing economies
(0.0) (0.0)
6.6 6.4
0
China
6.7 6.8
(+0.1) (+0.1)
5.3 5.3
ASEAN 5
4.9 5.3
-1
(+0.1) (0.0)
CY
Chart 3
Japan's Economy
Business Conditions DI
Business Fixed
Corporate Profits
(Tankan)
Investment
s.a., ann., tril. yen
s.a., % DI ("favorable" - "unfavorable"), % points
7 90
20
千
"Favorable"
Ratio of current profits to sales
Private nonresidential
(all industries and enterprises)
investment
6
10
85
(SNA, real)
"Unfavorable"
5
0
80
4 -10
75
3
-20
70
2 -30
All industries
65
1 -40
and enterprises
60
0 -50
CY CY 05 06 07 08 09 10 11 12 13 14 15 16 17
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
Chart 4
Labor Market Conditions and Software Investment
Software Investment (Tankan)
Employment Conditions DI (Tankan)
reversed, DI ("excessive" - "insufficient"), % points FY 2005 = 100
-80 180
All industries
All industries
Construction
170
Construction
Retailing
Retailing
-60
Accommodations, eating & drinking services
160
Accommodations, eating & drinking services
150
-40
140
"Insufficient"
130
-20
120
110
0
100
90
20
80
"Excessive"
40 70
CY 05 06 07 08 09 10 11 12 13 14 15 16 17 FY 05 06 07 08 09 10 11 12 13 14 15 16 17
Chart 5
Employment Situation
Unemployment Rate
Active Job Openings-to-Applicants Ratio
s.a., %
s.a., ratio
1.8 6
1.7
1.6
1.5 5
1.4
1.3
1.2 4
1.1
1.0
0.9 3
0.8
0.7
0.6 2
0.5
0.4
0.3 1
CY 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 CY 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
Chart 6
Private Consumption
Confidence Indicator Related
Consumption Activity Index
to Private Consumption
s.a., CY 2010=100 s.a.
108 60
55
106
50
104
45
102
40
35
100
Improved
30
98
25
96
Worsened
Consumption Activity Index
20
(travel balance adjusted, real)
Economy Watchers Survey (household activity)
94 15
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
Notes: 1. The Consumption Activity Index is based on BOJ staff calculations. Figures for the Consumption Activity Index