Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kyoto
(via webcast)
NAKAGAWA Junko
Member of the Policy Board
I. Economic Developments
A. Current Situation
I would like to begin my speech by talking about the current situation of Japan's economy
from two aspects, the corporate sector and the household sector.
Overseas economies, upon which Japan's corporate sector is predicated, continue to endure
uncertainty under waves of the novel coronavirus (COVID-19) (Chart 1). As the world enters
its third year of the pandemic, however, countries are making efforts to strike a balance
between protection of public health and resumption of economic activities while adopting
policy responses based on their respective circumstances. Against this background, overseas
economies have recovered on the whole, albeit with variation across countries and regions.
This is confirmed by the Global Purchasing Managers' Index (PMI), in which figures for both
the manufacturing and services industries remain at levels above the 50 mark (Chart 1).
With overseas economies recovering on the whole, Japan's exports and industrial production
continue to increase as a trend, despite the remaining effects of supply-side constraints (Chart
2). In particular, exports to advanced and emerging economies continue on an uptrend mainly
due to the expansion in global demand for digital-related goods; those to China also remain
at a high level (Chart 3). Looking at the Bank of Japan's December 2021 Tankan (Short-Term
Economic Survey of Enterprises in Japan), corporate profits and business sentiment continue
to improve on the whole; business fixed investment has also picked up overall, although
weakness has been seen in some industries due mainly to the effects of supply shortages,
particularly of parts for such items as automobiles and mobile phone base stations (Chart 4).
In light of these circumstances, the Bank's basic assessment is that a virtuous cycle continues
to operate in the corporate sector, whereby a rise in overseas demand feeds into a pick-up in
business fixed investment through improvements in firms' sentiment and profits. Yet,
automakers are still cutting production, even though the effects of supply-side constraints
have begun to bottom out. Thus, attention should be paid to the fact that exports and
production have not recovered to the levels seen around July 2021, that is, before the effects
of the supply-side constraints arising from ASEAN countries intensified.
Turning to the household sector, there has been a drastic change in consumption activities
between those up until the beginning of 2022 and those thereafter. Specifically, a pick-up in
consumption of both goods and services became evident from late December 2021 through
early January as people were more willing to be out and about, including the elderly, owing
to the lifting of the state of emergency at the end of September, including in Kyoto Prefecture.
However, at the turn of 2022, the outbreak of the Omicron variant led many prefectures to
implement priority measures to prevent the spread of disease. Thus, consumption, mainly for
services, has been pushed down temporarily (Chart 5).
The employment and income situation remains relatively weak on the whole, although
improvement has been seen in some parts. To be specific, the number of regular employees
and the amount of scheduled cash earnings continue on a moderate uptrend, and there have
also been improvement in job openings for non-regular employees reflecting the resumption
of face-to-face service operations; however, employee income remains at a relatively low
level (Chart 6). I will be keeping track of whether developments in job vacancies actually
result in an increase in the number of non-regular employees, which has been on a downtrend.
Given these economic developments, the real GDP growth rate (the first preliminary estimate)
for the October-December quarter of 2021 moved markedly into positive territory, increasing
by 1.3 percent on a quarter-on-quarter basis, and 5.4 percent on an annualized basis -- marking
a clear pick-up from a somewhat large negative growth rate for the July-September quarter,
which was minus 0.7 percent on a quarter-on-quarter basis, and minus 2.7 percent on an
annualized basis. Since January 2022, however, the situation remains highly unpredictable
due to the impact of COVID-19.
B. Outlook
Regarding the outlook, Japan's economy is likely to recover as downward pressure stemming
from COVID-19 on services consumption and the effects of supply-side constraints wane,
while being supported by the increase in external demand, accommodative financial
conditions, and the government's economic measures.
To elaborate a little, in the corporate sector, exports and industrial production are likely to
return to a clear expansionary trend. This will be propelled by the receding impact of
automobile-related production cuts expected to be seen around the end of FY2021 and into
the beginning of the next fiscal year, coupled with an increase in the export and production
of capital goods and IT-related goods due to an expansion in global demand for digital-related
goods. With regard to business fixed investment, an uptrend is expected to become evident
across a broad range of areas -- mainly for machinery and digital-related investments and for
research and development (R&D) investment related to decarbonization -- supported by
robust corporate profits and accommodative financial conditions, with supply-side
constraints easing. In the household sector, private consumption is expected to recover as the
impact of people's stay-at-home behavior in response to COVID-19 and the effects of supply-
side constraints wane and pent-up demand materializes with the withdrawal of "forced
saving."
Additionally, the economy is expected to be boosted, especially in FY2022, if the
government's economic measure decided in late 2021 -- with a project size of 78.9 trillion
yen and fiscal spending of 55.7 trillion yen -- is implemented as planned. The measure will
likely lead to an increase in (1) private consumption spurred by, for example, subsidies to
child-rearing households, (2) government spending related in part to the administration of a
third COVID-19 vaccine dose, and (3) business fixed investment to promote economic
security.
In light of these factors, the Bank's Policy Board members' baseline scenario presented in the
January 2022 Outlook for Economic Activity and Prices (Outlook Report) forecasts a real
GDP growth rate of 2.8 percent for FY2021, 3.8 percent for FY2022, and 1.1 percent for
FY2023 (Chart 7). The forecasts of the majority of Policy Board members for FY2022 range
by 0.8 percentage points (3.3 percent to 4.1 percent) -- the largest gap since the forecasts for
FY2021 (3.6 percent to 4.4 percent) presented in the April 2021 Outlook Report -- suggesting
that the forecasts for the GDP growth rate for FY2022 vary among the Board members.
C. Risk Factors
Next, I will touch on the risks involved in the baseline scenario of the outlook for economic
activity. The Bank's assessment is that risks to economic activity are skewed to the downside
for the time being, mainly due to the impact of COVID-19, but are generally balanced
thereafter.
To go into somewhat more detail, in the corporate sector, global supply-demand conditions
of semiconductors and related products remain tight, as the trend of rapid expansion in
demand for digital-related goods continues. In such a situation, if any kind of supply-side
shock occurs, such as the constraints on parts supplies triggered by surging COVID-19 cases
in ASEAN countries around summer 2021, there is a risk that exports and production will be
pushed down again through supply-chain disruptions.
In the household sector, there is a risk of a renewed slump in consumption, particularly among
the elderly, depending on the course of COVID-19, including variants. On the other hand, if
people's vigilance against COVID-19 lessens significantly with the widespread vaccinations
and the rollout of antiviral medicines, the increase in pent-up demand for services
consumption could become larger than expected.
Meanwhile, there is a risk that overseas economies, particularly emerging economies, will
deviate downward from the baseline scenario if global financial conditions tighten by more
than expected amid concern in global financial markets over steps taken by advanced
economies toward reducing monetary accommodation on the back of continuing elevated
inflation rates. At the same time, overseas economies could deviate upward from the baseline
scenario, mainly through consumption activities, with the rapid spending of household
savings that have accumulated significantly in the respective economies due to restrictions
during the COVID-19 pandemic.
Moreover, with the prolonged impact of COVID-19, attention should be paid to (1) structural
changes in the consumption behavior of individuals, as seen in the expansion in e-commerce,
(2) supply-side constraints caused mainly by the downsizing of existing businesses, and (3)
workforce disparities across industries and firm size.
II. Price Developments
A. Current Situation and Outlook
Next, I would like to talk about price developments in Japan.
The year-on-year rate of change in the consumer price index (CPI) for all items less fresh
food, despite being affected by the reduction in mobile phone charges, has been slightly
positive, reflecting price rises of energy and other items. Also, the breakdown of
developments in the year-on-year rate of change in the CPI for all items less fresh food and
energy, and excluding temporary factors such as the effects of the reduction in mobile phone
charges, shows that the positive contributions of goods and general services have expanded,
and that the pass-through of increases in raw material costs and personnel expenses seems to
be gradually prevailing (Chart 8). Looking at annual price changes in all CPI items less fresh
food, the share of price-increasing items rose even more for January 2022 from the previous
month, exceeding the pre-pandemic level seen around 2019.
In this situation, it is projected in the baseline scenario of the outlook for prices that firms'
price-setting stance will gradually become active and the pass-through of raw material cost
increases will progress moderately, with continuing improvement in the output gap. The
medians of the Policy Board members' forecasts presented in the January Outlook Report for
the year-on-year rate of change in the CPI excluding fresh food are 0.0 percent, 1.1 percent,
and 1.1 percent for FY2021, 2022, and 2023, respectively (Chart 7).
However, considering the time it has taken thus far for cost increases such as of raw materials
to be actually passed on to selling prices and the elevated crude oil prices due to recent
geopolitical risks, it is possible that inflationary pressure will remain strong for the time being,
mainly for prices of energy and food products. Such prices for January 2022 increased by
17.9 percent and 1.4 percent, respectively, from the same month in the previous year.
Moreover, from April onward, the year-on-year rate of change in the CPI for all items less
fresh food may momentarily rise to a level close to 2 percent if the effects of the reduction in
mobile phone charges dissipate. Nevertheless, even if this is the case, it will be important to
analyze what lies behind such inflation and whether Japan's economy has strong enough
fundamentals to allow it to be sustainable.
In this regard, the government has been committed to making arrangements to encourage
wage increases, as shown, for example, by its indication in the outline for tax reform for
FY2022 that it will strengthen tax incentives for firms that raise wages. The Japan Business
Federation, or Keidanren, has also indicated in its guidelines for the annual spring labor-
management wage negotiations in 2022 that it is desirable for firms that maintain favorable
results or those that have improved their performance to raise wages, including an increase
in base pay, to a level that is appropriate for the triggering of a new form of capitalism. Thus,
attention is warranted on how the wage negotiations progress. Either way, it is extremely
important that a virtuous cycle be created where corporate activities are boosted as vigilance
against COVID-19 decreases, which in turn encourages wages and prices to increase steadily
without a large time lag between them, thereby stimulating consumption. I hope that this
virtuous cycle is actually realized. On the other hand, given that producer prices have marked
a historically high increase, with the year-on-year rate of change for January 2022 being 8.6
percent, and that the increase in the CPI excluding fresh food remains low, with the year-on-
year rate of change for the same period being 0.2 percent, I would like to pay attention to
whether or not the gap between producer prices and consumer prices leads to a decrease in
corporate profits through squeezed profit margins, thereby exerting downward pressure on
business fixed investment and wages.
B. Risk Factors
Let me point out two downside risks to the baseline scenario of the outlook for prices. One
risk is that downward pressure on Japan's economy, stemming from the impact of COVID-
19 and developments in overseas economies, will weigh on prices. On top of that, there is a
risk that the rate of increase in prices will slow if (1) households do not become more tolerant
to price rises amid the deeply entrenched behavior and mindset, mainly among firms, based
on the assumption that prices will not increase easily, and (2) the pass-through of cost
increases to selling prices is limited, despite improvement in the output gap and an increase
in raw material costs.
On the other hand, given, for example, the recent rise in producer prices and an increase in
firms' inflation expectations shown in the December 2021 Tankan, consideration should also
be given to the upside risk that, as private consumption will likely continue to recover, cost
increases will be passed on to selling prices, not only at the producer level but also at the
downstream consumer level, at a faster-than-expected pace.
Against this background, the Bank judged in the January Outlook Report that upside and
downside risks to overall prices were generally balanced.
III. The Bank's Monetary Policy
A. Response to COVID-19
In what follows, I would like to touch on the Bank's monetary policy.
In response to COVID-19, the Bank has been supporting financing, mainly of firms, and
maintaining stability in financial markets by conducting powerful monetary policy through
the following three measures since March 2020 (Chart 9): (1) the Special Program to Support
Financing in Response to COVID-19 (the Special Program), consisting of (a) the Special
Funds-Supplying Operations to Facilitate Financing in Response to COVID-19 (the Special
Operations to Facilitate Financing) and (b) additional purchases of CP and corporate bonds;
(2) flexible provision of ample funds, mainly by purchasing Japanese government bonds
(JGBs) and conducting the U.S. dollar funds-supplying operations; and (3) purchases of
exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). These three
measures, coupled with the government's measures and financial institutions' proactive efforts,
have had positive effects.
Financial conditions in Japan have recently improved on the whole, with precautionary
demand for liquidity subsiding, particularly among large firms. Financial positions of small
and medium-sized firms, or SMEs, have been on an improving trend on the whole, but
weakness remains in some segments, such as the face-to-face services industry. Given these
developments, at the Monetary Policy Meeting (MPM) held in December 2021, the Bank
discussed the treatment of the Special Program, which was originally introduced as a
temporary measure until the end of March 2022. Specifically, it decided to extend by six
months the fund-provisioning to SMEs under the Special Operations to Facilitate Financing,
with a view to continuing to do its utmost to support financing, mainly of these enterprises
(Chart 10). On the other hand, the Bank decided to complete as scheduled at the end of March
2022 another component of the Special Operations to Facilitate Financing, namely, the fund-
provisioning against private debt pledged as collateral, which mainly consists of debt issued
by large firms and housing loans, and likewise its additional purchases of CP and corporate
bonds. From April 2022 onward, the Bank will purchase about the same amount of CP and
corporate bonds as prior to the COVID-19 pandemic.
Still, uncertainty over the course of the pandemic remains high, given the possibility that
other new variants may emerge. I assume many businesses in Kyoto Prefecture are facing
tight financing conditions, as the eating and drinking as well as accommodations industries
account for a greater proportion of the gross prefectural product than the national average. In
light of this situation, I consider it necessary to continue to carefully monitor the financing
conditions of SMEs under the extended Special Program from April onward.
B. Response to Climate Change
Next, I will explain the Bank's response to climate change. Amid growing international
interest in climate change issues, the Japanese government has declared its aim of achieving
carbon neutrality by 2050. Although the policy response to achieve this goal is essentially the
role of the government and the Diet, climate change itself and the response measures
implemented could exert an extremely large impact on developments in economic activity
and prices and on financial conditions from a medium- to long-term perspective. For this
reason, the Bank considers that contributing to macroeconomic stability in the long run by
supporting the private sector's efforts on climate change is consistent with the monetary
policy mission to achieve price stability, thereby contributing to the sound development of
the national economy.
Guided by this fundamental approach, at the MPM held in June 2021, the Bank decided to
introduce a new fund-provisioning measure, namely the Funds-Supplying Operations to
Support Financing for Climate Change Responses (Climate Response Financing Operations).
Through these operations, the Bank provides funds to financial institutions for investment or
loans that they make to address climate change issues based on their own decisions (Chart
11). After working out the details, the Bank made its first auction and loan disbursement under
the operations in late December, amounting to over 2 trillion yen. Currently, a total of 43
financial institutions, including from Kyoto Prefecture, have been selected as eligible
counterparties. Moreover, compared to summer 2021, when the Bank decided to launch the
operations, there has been a marked increase in financial institutions disclosing a certain level
of information such as the target amounts of investments or loans, indicating a high degree
of interest among the institutions.
Japan's response to climate change is still in its early stages. That said, the Bank considers the
Climate Response Financing Operations to be a sustainable initiative that will contribute to
macroeconomic stability in the long run while adhering to its mandate as a central bank. The
Bank will continue to offer robust support from the financial side for the private sector's
various efforts in fields related to climate change. At the same time, the Bank will work to
provide information in an appropriate manner to promote an accurate understanding among
both domestic and foreign market participants and individuals in Japan of the Bank's view
and strategy on climate change.
C. Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control
Now I would like to discuss the Bank's monetary policy conduct that also looks ahead to the
post-COVID-19 era. Since April 2013, the Bank has continued large-scale monetary easing
with the aim of achieving the price stability target of 2 percent at the earliest possible time.
The basic framework of the Bank's current QQE with Yield Curve Control has not changed
since another member of the Policy Board gave a detailed explanation during a visit to Kyoto
in August 2018. However, in March 2021 the Bank conducted an assessment of the measures
taken until then to conduct further effective and sustainable monetary easing, as it was
expected to take time to achieve the 2 percent target (Chart 12). The assessment found that:
(1) to achieve the 2 percent target, it was appropriate for the Bank to continue with QQE with
Yield Curve Control, which was effective in pushing up economic activity and prices; and (2)
to that end, it was important to continue with monetary easing in a sustainable manner and
make nimble and effective responses without hesitation to counter changes in economic
activity, prices, and financial conditions. Guided by this basic approach, for example, the
Bank introduced a measure, namely the Interest Scheme to Promote Lending, to mitigate the
impact on financial institutions' profits to a certain degree at the time of rate cuts, depending
on the amount of their lending. Also, under QQE with Yield Curve Control, the Bank has
been purchasing JGBs in a way that keeps long-term interest rates (10-year JGB yields) at
around zero percent. The Bank previously indicated that, while doing so, the yields may move
upward and downward to some extent. Following the assessment, however, the Bank made
clear that the range of 10-year JGB yield fluctuations would be between around plus and
minus 0.25 percent from the target level. Moreover, as the findings of the assessment
suggested that large-scale ETF and J-REIT purchases were effective during times of
heightened market instability, the Bank decided to purchase these instruments flexibly in a
prioritized manner.
I believe that the Bank's unwavering commitment to continuing with powerful monetary
easing under QQE with Yield Curve Control, whose sustainability and nimbleness have been
enhanced, is the necessary policy measure to achieve the 2 percent price stability target,
although it may take time. Having said that, I do not think it is enough simply to reach 2
percent: the end goal is for accommodative financial conditions to facilitate higher corporate
profits and improved labor market conditions, and thereby generate a virtuous cycle in which
wages and prices see sustained increases. This is what makes it necessary for households in
Japan to become more tolerant of price increases and for economic entities to come to terms
with the view that prices are bound to rise to some extent. In other words, it is important to
bring about a society in which the whole country can feel and enjoy the positive merits and
benefits of economic growth that exceeds the rise in prices.
Japanese firms that are expanding, diversifying, and upgrading their overseas activities, such
as industrial production, sales, investment, and fund management, are experiencing firsthand
the growth of emerging economies in Asia and elsewhere. I think this holds true for firms in
Kyoto as well. There is no time to waste in moving forward with reforming the industrial
structure, social system, and economic structure so that Japanese firms will realize growth
amid mounting competition and Japan's economy as a whole will also achieve growth through
digitalization and the realization of a carbon-neutral society.
I believe it is imperative that the Bank, guided by its mandate of achieving price stability and
ensuring the stability of the financial system, play its role to ascertain the extent to which
monetary policy can be effective, and continue to provide appropriate support for Japan's
sustainable growth.
Thank you.
Economic Activity, Prices,
and Monetary Policy in Japan
Speech at a Meeting with Local Leaders in Kyoto
(via webcast)
March 3, 2022
NAKAGAWA Junko
Member of the Policy Board
Bank of Japan
I. Economic Developments
II. Price Developments
III. The Bank's Monetary Policy
Overseas Economies
(1) Confirmed New Cases of COVID-19 (2) Global PMI
ten thous. persons
140
United States
s.a., DI
60
120 Europe
India
55
100
Latin America
50
Other emerging economies
80
45
40
60
35
40
Manufacturing
30
20
25 Services
0 20
Feb.1 /20 Aug.1 Feb.1 /21 Aug.1 Feb.1 /22 CY 07 09 11 13 15 17 19 21
Note: Figures for manufacturing are the J.P.Morgan Global Manufacturing PMI. Those for services are
Note: The latest figures are for February 25, 2022. Figures for the United States, Taiwan, and
the J.P.Morgan Global Services Business Activity Index.
Hong Kong are from the Centers for Disease Control and Prevention (CDC), the Taiwan
Source: IHS Markit (© and database right IHS Markit Ltd 2022. All rights reserved.).
Ministry of Health and Welfare, and the Hong Kong Centre for Health Protection,
Department of Health, respectively. All other figures are from the World Health
Organization (WHO). Figures for Europe are the sum of figures for the European Union
(EU) and the United Kingdom. Figures for Latin America are the sum of figures for the
major economies in the region. Figures for other emerging economies are the sum of
figures for South Africa, Russia, Turkey, and the major economies in the NIEs, ASEAN,
and the Middle East. Figures show 7-day backward moving averages.
Source: CEIC.
I. Economic Developments Chart 2
Corporate Sector in Japan
(3) Real Exports and Imports (4) Industrial Production
s.a., CY 2015=100
s.a., CY 2015=100
s.a., % of real GDP
120
120 10
110 8
110
100 6
90 4
100
80 2
70 0
Production
60 -2 90
Real trade balance (right scale)
Inventories
Real exports (left scale)
50 -4
Real imports (left scale)
40 -6
80
CY 06 08 10 12 14 16 18 20 22
CY 06 08 10 12 14 16 18 20 22
Notes: 1. Shaded areas denote recession periods.
Note: Based on Bank staff calculations. Figures for 2022/Q1 are those for January.
2. The figure denoted by the circle to the right is calculated using projections by the Ministry
Sources: Cabinet Office; Ministry of Finance; Bank of Japan.
of Economy, Trade and Industry for February and March 2022. The inventories figure for
2022/Q1 is that for January.
Source: Ministry of Economy, Trade and Industry.
Corporate Sector in Japan
(5) Real Exports by Region (6) Real Exports by Type of Goods
s.a., 2016/Q1=100 s.a., 2016/Q1=100 s.a., 2016/Q1=100 s.a., 2016/Q1=100
150 140 140
150
Intermediate
goods <22.4>
140 140
130 130
Motor vehicles and
130 130 related goods <20.6>
120 120
120
120
110 110
110 110
100 100
100 100
90 90
90 90
80 80
China <21.6>
IT-related goods
80 80
<21.2>
United States
NIEs, ASEAN,
70 70
70 70
<17.9>
etc. <36.3>
Capital goods
Other economies
60 60 60 60
EU <9.2> <17.8>
<15.0>
50 50
50 50
CY 16 17 18 19 20 21 22 16 17 18 19 20 21 22
CY 16 17 18 19 20 21 22 16 17 18 19 20 21 22
Notes: 1. Based on Bank staff calculations. Figures in angle brackets show the share of each country
Note: Based on Bank staff calculations. Figures in angle brackets show the share of each type of goods
or region in Japan's total exports in 2021. Figures for 2022/Q1 are those for January.
in Japan's total exports in 2021. Figures for 2022/Q1 are those for January.
2. Figures for the EU exclude those for the United Kingdom for the entire period.
Sources: Ministry of Finance; Bank of Japan.
Sources: Ministry of Finance; Bank of Japan.
I. Economic Developments Chart 4
Corporate Sector in Japan
(8) Planned and Actual Business
(7) Business Conditions
Fixed Investment
DI ("favorable" - "unfavorable"), % points
y/y % chg.
60 20
Private nonresidential investment (SNA, nominal)
All industries
Tankan (actual)
15
40
Manufacturing
Tankan (planned investment in current fiscal
10 year as of the December survey of each year)
Nonmanufacturing
20
5
0
0
-5
-20
"Favorable"
-10
-40
-15
"Unfavorable"
-60
-20
CY 90 95 00 05 10 15 20
FY 06 08 10 12 14 16 18 20
Notes: 1. Figures are for enterprises of all sizes from the There is a discontinuity in the
Tankan.
Notes: 1. The Tankan figures include software and R&D investments and exclude land purchasing
data for December 2003 due to a change in the survey framework.
expenses. R&D investment is not included before the March 2017 survey. The figures are
2. Shaded areas denote recession periods.
for enterprises of all industries including financial institutions.
Source: Bank of Japan.
2. The figure for private nonresidential investment for FY2021 is the 2021/Q2-Q4 average.
Sources: Cabinet Office; Bank of Japan.
Household Sector in Japan
(10) Consumption Developments
(9) Private Consumption
Based on Credit Card Spending
change from baseline, %
s.a., CY 2015=100
120 30
115 20
110 10
105 0
100
-10
95
-20
Consumption Activity Index (travel
balance adjusted, real)
90
-30
Total
Consumption of households excluding
imputed rent (SNA, real) Retail
85
-40
Disposable income, etc. (SNA, real)
Service
80
-50
CY 09 10 11 12 13 14 15 16 17 18 19 20 21
July 19 Jan. 20 July Jan. 21 July Jan. 22
Notes: 1. Figures for the Consumption Activity Index (CAI) are based on Bank staff calculations.
Notes: 1. Figures are from the reference series in JCB Consumption NOW, taking into account
The CAI figures (travel balance adjusted) exclude inbound tourism consumption and include
changes in the number of consumers.
outbound tourism consumption.
2. The baseline is the average for the corresponding half of the month for FY2016 through
2. "Disposable income, etc." consists of disposable income and adjustment for the change in
FY2018.
pension entitlements. Real values are obtained using the household consumption deflator.
Source: Nowcast Inc./ JCB, Co., Ltd., "JCB Consumption NOW."
Sources: Cabinet Office; Bank of Japan, etc.
I. Economic Developments Chart 6
Employment and Income Situation in Japan
(11) Employee Income (12) Job Openings-to-Applicants Ratio
s.a., ratio
y/y % chg.
2.6
4
Active job openings-to-applicants
ratio
2.2
2
New job openings-to-applicants
ratio
1.8
0
1.4
-2
Total cash earnings
-4 1.0
Number of employees
Employee income
-6 0.6
Real employee income
-8
0.2
09/Q1 11/Q1 13/Q1 15/Q1 17/Q1 19/Q1 21/Q1 CY
06 08 10 12 14 16 18 20
Source: Ministry of Health, Labour and Welfare.
Notes: 1. Q1 = March-May, Q2 = June-August, Q3 = September-November, Q4 = December-February.
Figures for 2021/Q4 are those for December.
2. Employee income = total cash earnings (Monthly Labour Survey) ×number of employees
(Labour Force Survey)
3. Figures from 2016/Q1 onward are based on continuing observations following the sample
revisions of the Monthly Labour Survey.
4. Figures for real employee income are based on Bank staff calculations using the CPI (less
imputed rent).
Sources: Ministry of Health, Labour and Welfare; Ministry of Internal Affairs and Communications.
I. Economic Developments Chart 7
Outlook for Economic Activity and Prices
(as of January 2022)
y/y % chg.
CPI
Real GDP
(all items less fresh food)
+2.7 to +2.9 0.0 to +0.1
FY2021
[+2.8] [0.0]
+3.0 to +3.6 0.0 to +0.2
Forecasts made in Oct. 2021
[+3.4] [0.0]
+3.3 to +4.1 +1.0 to +1.2
FY2022
[+3.8] [+1.1]
+2.7 to +3.0 +0.8 to +1.0
Forecasts made in Oct. 2021
[+2.9] [+0.9]
+1.0 to +1.4 +1.0 to +1.3
FY2023
[+1.1] [+1.1]
+1.2 to +1.4 +0.9 to +1.2
Forecasts made in Oct. 2021
[+1.3] [+1.0]
Note: Figures in brackets indicate the medians of the Policy Board members' forecasts (point estimates).
Source: Bank of Japan.
II. Price Developments Chart 8
CPI
(1) Less Fresh Food (2) Excluding Temporary Factors
y/y % chg.
y/y % chg.
2.5 1.5
Goods
2.0
General services (less house rent)
1.5
House rent (private and imputed rent)
Administered prices
1.0 1.0
CPI (less fresh food and energy)
0.5
0.0
-0.5 0.5
Mobile phone charges
-1.0
Effects of the "Go To Travel"
campaign
-1.5
Effects of the consumption tax hike and
free education policies
0.0
-2.0
Energy
-2.5
Excluding the above factors
-3.0
CPI (less fresh food)
-0.5
-3.5
CY 16 17 18 19 20 21 22
CY 16 17 18 19 20 21 22
The Bank's Measures in Response to COVID-19
(from March 2020)
Supporting Corporate Financing
Special Program
 Purchases of CP and corporate bonds: amount outstanding of about 20 tril. yen
at maximum (previous amount outstanding of about 5 tril. yen)
 Special Operations to Facilitate Financing
Stabilizing Financial Markets
Flexible Provision of Ample Yen and Foreign Currency Funds

Active purchases of JGBs and T-Bills
 U.S. Dollar Funds-Supplying Operations
Lowering Risk Premia in Asset Markets
Purchases of ETFs and J-REITs
 ETFs: annual pace with an upper limit of about 12 tril. yen
 J-REITs: annual pace wi