Monthly Report of Recent Economic and Financial Developments 1 April 2009 (Summary)
(English translation prepared by the Bank's staff based on the Japanese original)
- This report is based on data and information available at the time of the Bank of Japan Monetary Policy Meeting held on April 6 and 7, 2009.
April 8, 2009
Bank of Japan
Japan's economic conditions have deteriorated significantly.
Exports have decreased substantially, mainly due to the deterioration in overseas economic conditions. Corporate profits have declined at a faster pace, and business sentiment has deteriorated significantly. In this situation, business fixed investment has declined substantially. Private consumption has weakened and housing investment has decreased, as the employment and income situation has become increasingly severe. Public investment, meanwhile, has been sluggish. Reflecting these developments in demand both at home and abroad and adjustment pressures on inventories, production has decreased substantially.
Japan's economic conditions are likely to continue deteriorating for the time being.
Exports and production are expected to remain on a downtrend, but the pace of decline is expected to moderate as adjustment pressures on inventories both at home and abroad wane. On the other hand, domestic private demand is likely to weaken further amid continued severe conditions in corporate profits and firms' funding as well as an increasingly severe employment and income situation. Public investment, meanwhile, is projected to be sluggish.
On the price front, the three-month rate of change in domestic corporate goods prices has continued to be negative, mainly due to the drop in international commodity prices. The year-on-year rate of increase in consumer prices (excluding fresh food) has declined to 0 percent, mainly reflecting the declines in the prices of petroleum products and the stabilization of food prices.
Domestic corporate goods prices are likely to continue decreasing for the time being, as the effects of the drop in international commodity prices are expected to remain and the easing of supply-demand conditions for products will continue. The year-on-year rate of increase in consumer prices is expected to become negative, mainly due to the declines in the prices of petroleum products and the stabilization of food prices and also to increasing slackness in supply and demand conditions in the overall economy.
The weighted average of the overnight call rate has been moving at around 0.1 percent, and interest rates on term instruments have remained more or less unchanged. Meanwhile, yields on long-term government bonds and stock prices have risen compared with last month, while the yen has depreciated against the U.S. dollar.
Financial conditions in Japan have remained tight.
The overnight call rate has been at an extremely low level, but the stimulative effects from this have become increasingly limited given the significant deterioration in economic activity. Firms' funding costs have declined compared with the levels at the end of last year, following the reductions in the policy interest rate and improvements in issuance conditions in the CP market. The amount outstanding of CP and corporate bonds issued has been increasing since a while ago, and that of bank lending, especially to large firms, has continued to increase rapidly. However, issuance of corporate bonds by firms with low credit ratings has remained subdued, and an increasing number of firms have reported that their financial positions are weak and lending attitudes of financial institutions are severe. Meanwhile, the year-on-year rate of change in the money stock has been around 2 percent.