Regional Economic Report (Summary)(July 2005)^*

* This report is based on data and other information gathered for the Bank of Japan's branch managers' meeting held today. The report summarizes the reports from all regional research divisions, mainly at the Bank's branches in Japan, and does not necessarily reflect a consensus of the Bank. The English translation is based on the Japanese original released on July 6, 2005.

July 6, 2005
Bank of Japan

According to reports from each of the nine regions in Japan, the economy is on a gradual recovery trend in many regions with some weak movements diminishing.

Specifically, the economic assessments of seven out of nine regions indicated that the economy was on "a gradual recovery trend," and the sentiment that the recovery had "come to a pause" was subsiding recently. Meanwhile, economic activity remained virtually flat in the Hokkaido and Tohoku regions.

Compared with the assessment in April 2005, at the time of the last branch managers' meeting, three out of nine regions (Hokkaido, Tohoku, and Kyushu-Okinawa) basically maintained their previous assessment. However, the other regions revised their assessment slightly upward due to an upward revision of business fixed investment plans, improvement in the employment situation, and the progress in adjustments in IT-related sectors.

Region	Assessment in July 2005	Assessment in April 2005
Hokkaido	Economic activity remains virtually flat.	Economic activity remains virtually flat.
Tohoku	Economic activity remains virtually flat, although there seem to be some positive movements.	The economy has been at a standstill.
Hokuriku	The economy continues to recover gradually, while recent adjustments mainly in production are subsiding.	The economy continues to recover gradually, although there seem to be somewhat weak movements mainly in production.
Kanto- Koshinetsu	The economy is on a gradual recovery trend, while some signs of weakness are diminishing.	The economy is on a gradual recovery trend, although there seem to be some signs of weakness.
Tokai	The economy remains on a recovery trend, and recently seems to be no longer at a pause.	The economy continues to recover, although it recently seems to be coming to a pause.
Kinki	The economy continues to be on a recovery trend, while recent adjustments are gradually subsiding.	The economy continues to be on a recovery trend as a whole, although there seem to be some weak movements.
Chugoku	The economy is on a gradual recovery trend, while recent adjustments in some areas are subsiding.	The pace of economic recovery is slowing.
Shikoku	The economy continues to improve gradually, and recently seems to be no longer at a pause in some areas.	The economy continues to improve gradually, although it recently seems to be coming to a pause in some areas.
Kyushu- Okinawa	The economy continues to recover gradually mainly in manufacturing.	The economy continues to recover mainly in manufacturing, albeit gradually.

Private consumption has been "improving" or "steady" in seven regions, while the Hokkaido region reported that it was "decreasing slightly to come to a halt." The Tohoku region did not show any noticeable positive or negative movements as a whole.

Sales of large-scale retail stores picked up in the Tokai region due mainly to the opening of new stores and showed some positive movements in the Hokkaido, Hokuriku, Kinki, and Kyushu-Okinawa regions. They remained virtually flat in the Kanto-Koshinetsu region, while somewhat weak in the other regions. On the other hand, sales of household electrical appliances and of passenger cars either picked up or were steady in all regions. As for tourism activity, while the Hokkaido region and part of the Shikoku region saw a decrease in the number of tourists, outlays for travel were favorable in the Tokai and Kyushu-Okinawa regions.

Compared with the previous assessment on private consumption, the Hokkaido and Kinki regions revised their assessments slightly upward from "sluggish" to "decreasing slightly to come to a halt," and from "steady" to "picking up gradually," respectively. Furthermore, the Kyushu-Okinawa region revised its assessment slightly upward by adding the phrase "some positive signs."

Business fixed investment has been on an increasing trend in all regions.

Compared with the previous assessment on business fixed investment, five regions (Tohoku, Hokuriku, Kinki, Chugoku, and Kyushu-Okinawa) revised their assessments upward, due mainly to an upward revision of business fixed investment plans, although there were differences in the degree of improvement.

Production remained virtually "flat" in the Tohoku, Kanto-Koshinetsu, Shikoku and Kyushu-Okinawa regions, while it decreased in the Hokkaido region. The Hokuriku, Kinki, and Chugoku regions assessed production to be "picking up" with differences in the degree of improvement and the Tokai region "picking up only slightly and being virtually flat as a trend." As for inventory adjustments in IT-related sectors, all regions, except for the Hokkaido region, reported that the progress had been made.

Compared with the previous assessment on production, the Hokkaido region revised its assessment downward from "increasing gradually" to "decreasing." On the other hand, five other regions revised their assessments slightly upward, while the Tohoku, Kanto-Koshinetsu, and Kyushu-Okinawa regions maintained their previous assessments.

As for the employment and income situation, labor market conditions have been on an improving trend in most regions, although there were differences in the degree of improvement. However, the Sanin area in the Chugoku region did not show any noticeable positive or negative movements. Regarding income and wages, the Hokkaido and Tohoku regions reported them to be weak, but the Kinki region reported that they were "bottoming out" and the Chugoku and Kyushu-Okinawa regions reported that they had "gradually stopped declining." The other regions assessed them to be continuing to improve at a moderate pace. In addition, the Kyushu-Okinawa region reported differences among areas within the region.

In comparison with the previous assessment, seven regions, excluding the Hokkaido and Kyushu-Okinawa regions, revised slightly upward their assessments on labor market conditions and employment, and six regions, excluding the Tohoku region in addition to the above two regions, revised slightly upward their assessments on income.

Region	Private Consumption	Business Fixed Investment	Production	Employment and Income
Hokkaido	Decreasing slightly to come to a halt.	Picking up mainly in manufacturing.	Decreasing recently.	The employment situation has been improving, although it remains severe. Wages continue to be somewhat weak.
Tohoku	Not showing any noticeable positive or negative movements as a whole.	Continues to increase mainly in manufacturing.	More or less flat.	Ratio of job offers to applicants continues to increase gradually. Income has been below the previous year's level.
Hokuriku	Continues to improve.	Continues to be above the previous year's level, and recently seems to have been revised upward.	Picking up as a whole.	The employment situation continues to improve as a whole. Wages have been above the previous year's level.
Kanto- Koshinetsu	Remains steady as a whole.	Continues to increase.	Almost flat on average.	The employment situation is improving in general. Household income is increasing gradually as a whole.
Tokai	Continues to be steady.	Continues to increase steadily.	Picking up only slightly and being virtually flat as a trend.	The employment and income situation is improving.
Kinki	Picking up gradually as a whole.	Increasing as a whole.	Some signs of gradual picking up.	The employment situation is improving gradually. Household income shows signs of bottoming out.
Chugoku	Showing improvements.	Increasing.	Picking up.	The employment situation continues to improve. Wages have gradually stopped declining.
Shikoku	Remains steady, albeit with some mixed movements.	Continues to recover mainly in manufacturing.	More or less flat.	The employment and income situation is showing signs of improvement.
Kyushu- Okinawa	Continues to be steady and there seem to be some positive signs.	Continues to increase mainly in manufacturing.	More or less flat, although it is at a high level as a whole.	The employment situation continues to be on a gradual improving trend. Household income has gradually stopped declining as a whole, with differences among areas within the region.

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Appendix: Prefectures Included in Each Region

Region	Prefectures
Hokkaido	Hokkaido
Tohoku	Miyagi, Aomori, Akita, Iwate, Yamagata, and Fukushima
Hokuriku	Ishikawa, Toyama, and Fukui
Kanto- Koshinetsu	Tokyo, Chiba, Saitama, Ibaraki, Tochigi, Gunma, Kanagawa, Niigata, Yamanashi, and Nagano
Tokai	Aichi, Shizuoka, Gifu, and Mie
Kinki	Osaka, Kyoto, Shiga, Nara, Wakayama, and Hyogo
Chugoku	Hiroshima, Okayama, Tottori, Shimane, and Yamaguchi
Shikoku	Kagawa, Tokushima, Ehime, and Kochi
Kyushu- Okinawa	Fukuoka, Saga, Oita, Nagasaki, Kumamoto, Miyazaki, Kagoshima, and Okinawa

For further information, please contact: Masato Kato (Mr.), Regional Economy, Research and Statistics Department Tel: +81-3-3277-1357