Regional Economic Report (Summary) (July 2009)^*

July 6, 2009
Bank of Japan

According to reports from each of the nine regions in Japan, economic conditions continued to be severe, although they had recently begun to stop worsening, with the pace of deterioration slowing.

Public investment increased. Exports and production had begun to turn upward mainly due to progress in inventory adjustments, although they were still at a low level. On the other hand, business fixed investment declined substantially, mainly due to the significant decrease in corporate profits. Private consumption continued to be weak as the employment and income situation became increasingly severe. Housing investment also decreased.

Assessments showed that the pace of economic deterioration was slower in all regions compared with the previous assessments. Most regions, however, emphasized that their economies continued to be in a severe situation: Hokkaido reported that its economy was stagnant; Tohoku, Hokuriku, and Kinki reported that their economic conditions were still severe; and Kanto-Koshinetsu and Kyushu-Okinawa inserted "after deteriorating significantly" into their assessments.

Region	Assessment in April 2009	Difference between assessments1	Assessment in July 2009
Hokkaido	Economic conditions are becoming increasingly severe, and the economy is stagnant.		The economy is stagnant.
Tohoku	Economic conditions are deteriorating significantly and becoming increasingly severe.		Economic conditions have begun to stop worsening, although they are still severe.
Hokuriku	Economic conditions are deteriorating significantly.		There are signs that economic conditions have begun to stop worsening, although they are still severe.
Kanto-Koshinetsu	Economic conditions are deteriorating significantly.		Economic conditions, after deteriorating significantly, have begun to stop worsening.
Tokai	The level of economic activity is declining rapidly.		Economic conditions have begun to stop worsening, mainly because exports and production have picked up.
Kinki	Economic conditions are deteriorating significantly, and the economy is in a severe situation.		Economic conditions have begun to stop worsening, although they are still severe.
Chugoku	Economic conditions are deteriorating.		Economic conditions have begun to stop worsening.
Shikoku	Economic conditions are deteriorating.		There are signs that economic activity has begun to stop worsening, although economic conditions as a whole have continued to deteriorate.
Kyushu-Okinawa	Economic conditions are deteriorating significantly.		Economic conditions, after deteriorating significantly, have begun to stop worsening.

Private consumption continued to be weak in all regions, reflecting the severe employment and income situation.

While some policy effects had appeared in sales of household electrical appliances (such as flat-panel televisions) and passenger cars (such as hybrid cars), sales at large retail stores continued to be weak, mainly in apparel and accessories.  Travel and leisure expenses were weak in both domestic and overseas travel, partly due to effects of the new strain of influenza.

Compared with the previous assessment of private consumption, most regions assessed that, although some policy effects had appeared, private consumption had remained weak.

Business fixed investment continued to decline substantially in many regions, mainly due to the significant decrease in corporate profits.

By industry, in manufacturing, business fixed investment declined in sub-industries such as transportation equipment, electrical machinery, and general machinery. As for nonmanufacturing, investment declined mainly in sub-industries such as wholesaling and retailing.

Compared with the previous assessment of business fixed investment, Hokkaido, Tokai, and Kinki assessed that the pace of decline had accelerated, while other regions maintained their previous assessments.

Production began to turn upward, although its level was still low and regional differences remained.

By industry, although there were regional differences, the production level was further reduced in general machinery, mainly reflecting the decline in business fixed investment. On the other hand, some regions reported that, as exports began to turn upward due to progress in adjustments in overseas inventories, production cuts were easing or production was turning upward in transportation equipment (motor vehicles and motor vehicle parts), chemicals (such as ethylene and polyvinyl chloride), and electronic parts and devices (such as cellular phones and LCD devices).

At the time of the previous assessment, only Kanto-Koshinetsu had assessed that there were signs that production might stop declining in some sub-industries. However, the assessment in July showed that production had stopped declining or had begun to stop declining in Hokkaido, Hokuriku, and Kinki, and had picked up or had begun to turn upward in Kanto-Koshinetsu, Tokai, Chugoku, and Kyushu-Okinawa.

The employment and income situation continued to deteriorate. Employment adjustments continued, and the ratio of job offers to applicants declined. Household income continued to decline mainly due to the decrease in employees' cash earnings such as non-scheduled cash earnings and special cash earnings.

Compared with the previous assessment of employment, Kinki and Kyushu-Okinawa reported that the pace of deterioration had accelerated. As for household income, Kinki, Chugoku, Shikoku, and Kyushu-Okinawa reported that the pace of decline had accelerated.

Appendix: Prefectures Included in Each Region