Regional Economic Report (Summary) (July 2006)^*

July 6, 2006
Bank of Japan

According to reports from each of the nine regions in Japan, the economy as a whole continues to recover steadily as almost all regions continue to be on the expansion or recovery trend.

Specifically, business fixed investment has been on an increasing trend in all regions, in a situation where private consumption as a whole has been firm, although there have been differences among regions. The level of housing investment and exports has also risen in many regions. Production has continued to increase reflecting the positive movements of final demand as described above, and the economy as a whole continues to recover steadily. However, degrees of improvement still differ among regions such as Hokkaido, which reported that "the pickup in the economy slowed," and Tokai and Kinki, which reported that the economy has been expanding.

Compared with the assessment in April 2006, at the time of the last branch managers' meeting, seven out of nine regions maintained their previous assessment. Tohoku revised its assessment slightly upward due to the increase in business fixed investment and production. Hokkaido revised its assessment slightly downward, since recovery in private consumption has weakened.

Private consumption has gradually been "increasing" or "recovering" in the Kanto-Koshinetsu, Tokai, and Kinki regions, and "steady" or "picking up" in most other regions. Meanwhile, Hokkaido reported that "recovery has weakened," mainly because of the delay in the improvement of household income.

Looking at major indicators of consumption, sales of passenger cars have recently shown some weakness. Sales of household electrical appliances have continued to be either "increasing" or "solid," particularly in digital household appliances such as flat-panel televisions and high-value-added white goods. Sales at large retail stores fell in April and May, particularly in apparel against the background of the unfavorably cold weather, but rose in accessories (such as designer products), suggesting that sales have been solid as a trend. Meanwhile, some regions reported that the number of tourists has exceeded that of last year, and outlays for travel, including summer holiday bookings, have remained solid.

Compared with the previous assessment on private consumption, Hokkaido revised its assessment slightly downward.

Business fixed investment has continued to be on an increasing trend in all regions, reflecting a favorable domestic and external demand and high corporate profits.

Compared with the previous assessment on business fixed investment, Tohoku revised its assessment upward, and Hokuriku, Kanto-Koshinetsu, and Kinki revised their assessment slightly upward.

Regarding production, most regions reported that production has been increasing. Meanwhile, Hokkaido reported that production has been "picking up gradually."

By industry, production continued to increase in the processing industries, particularly electronic parts and devices used for digital household appliances and mobile phones, electrical machinery, and also transportation equipment mainly for exports, such as automobile-related goods. In contrast, there were differences in trends among materials industries. While increases were observed in materials such as iron and steel, the level of production for textiles continued to be low.

Compared with the previous assessment, Tohoku revised its assessment upward, and Shikoku revised its assessment slightly upward.

As for the employment and income situation, the improvement has continued in all regions, as evident by the increase in new job offers reflecting the step-up in production level. However, the differences in assessments of labor market conditions among regions have continued to be substantial, from "the ratio of job offers to applicants has been at a high level" in Tokai to "improving, although it has remained severe" in Hokkaido. Despite the differences in degree, many regions reported that household income has been either increasing or improving, supported by improvements in labor market conditions and high corporate profits. On the other hand, Hokkaido reported that household income has been "somewhat weak," and Tohoku reported that it was "sluggish."

On the employment and income situation, all regions maintained their previous assessment.

Appendix: Prefectures Included in Each Region

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

For further information, please contact: Masayuki Shimizu (Mr.), Regional Economy, Research and Statistics Department Tel: +81-3-3277-2649