Regional Economic Report (Summary) (January 2007)^*

January 12, 2007
Bank of Japan

According to reports from each of the nine regions in Japan, the economy as a whole expanded moderately as all regions remained on an expansion or recovery trend, although there were regional differences.

Specifically, the corporate sector became more buoyant as seen in the fact that business fixed investment was on an increasing trend in all regions and business sentiment improved in most regions. In the household sector, some sluggishness was seen in private consumption due to the unfavorable weather, but the year-end and new-year sales were more buoyant than the previous year in many regions. Housing investment was increasing gradually in many regions, albeit with some fluctuations. Against the background of the increase in domestic and external demand, production continued to increase in most regions. The degree and momentum of economic recovery, however, still varied: Kanto-Koshinetsu, Tokai, and Kinki described the economic activity as expanding, while the other regions described it as being on a recovery trend.

Compared with the assessment in October 2006, at the time of the last branch managers' meeting, all regions maintained their assessments as either expanding or on a recovery trend.

Private consumption was gradually "increasing" or "recovering" in the Kanto-Koshinetsu, Tokai, and Kinki regions. In other regions, it was "steady," "picking up," or "flat."

Looking at major indicators of consumption, some regions reported that sales at large retail stores were increasing mainly for luxury goods, and food and beverages. Hokkaido, Tohoku, and Kyushu-Okinawa reported sluggish sales of winter clothing due to unusually warm weather. There were also reports that sales of household electrical appliances continued to be favorable, particularly for digital household appliances and high-value-added white goods. However, some regions reported that sales of personal computers and heating equipment were sluggish. Sales of passenger cars remained weak. With regard to tourism, travel expenses remained solid, supported by overseas travel.

The year-end and new-year sales were more buoyant than the previous year in many regions reflecting favorable sales of food and beverages (year-end gifts and traditional Japanese New Year food) and luxury goods.

Compared with the previous assessment of private consumption, Tohoku revised its assessment slightly downward.

Business fixed investment continued to be on an increasing trend in all regions reflecting growth in domestic and external demand and favorable corporate profits. Kanto-Koshinetsu and Chugoku reported that not only large firms but also small and medium-sized ones were actively investing in fixed assets.

Compared with the previous assessment of business fixed investment, Shikoku revised its assessment slightly upward.

Most regions reported that production was "increasing" supported by growing domestic and external demand. Hokkaido and Shikoku reported that production was "picking up gradually" and "recovering gradually," respectively.

By industry, in processing industries, production of electronic parts and devices continued to increase due to brisk demand, although there were reports indicating a decline in orders for and adjustment in production of certain types, especially those for mobile phones. Production of transportation equipment such as automobile-related goods increased mainly due to favorable exports. Production of general machinery also continued to be high. Meanwhile, trends in the materials industries still varied: iron and steel, and paper and pulp maintained a high level of production, while cement, ceramics and glass maintained low levels of production in most regions due to decreasing public investment.

Compared with the previous assessment of production, all regions kept their assessments unchanged.

Most regions reported that the employment and income situation was "improving." However, there were still substantial regional differences in the assessments of labor market conditions, ranging from "the ratio of job offers to applicants is at a high level" in Tokai to an assessment that "the employment situation remains flat" in Hokkaido.

Most regions reported that household income was either increasing or improving, with winter bonuses increasing from the previous year reflecting improvements in labor market conditions and favorable corporate profits. Tohoku reported that "household income is sluggish although the rate of decline compared to the year before is slowing," while Hokkaido reported that it continued to be "somewhat weak."

On the employment and income situation, all regions kept their assessments unchanged.

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: Naohiko Doi (Mr.), Regional Economy, Research and Statistics Department Tel: +81-3-3277-1357