Regional Economic Report (Summary) (July 2016)^*

• This report summarizes the reports from all regional research divisions, mainly at the Bank's branches in Japan, and is based on data and other information gathered for the meeting of general managers of the Bank's branches held today. The English translation is based on the Japanese original.

July 7, 2016
Bank of Japan

Compared with the last assessment in April 2016, the Chugoku region revised its assessment downward, reporting that relatively weak movements had been observed in some aspects, including production, and the Kyushu-Okinawa region also revised its assessment downward, noting visible effects of the Kumamoto Earthquake. Meanwhile, the other seven regions reported that their assessments regarding the pace of economic improvement had remained unchanged.

The Tokai region noted that its economy had been expanding at a moderate pace as a trend, and seven regions (excluding Tokai and Kyushu-Okinawa) reported that the economy had continued its moderate recovery trend, or had been recovering moderately, or had continued to recover. These reports were based on the assessments that, although exports and production had been sluggish, due mainly to the effects of the slowdown in emerging economies, on the domestic demand side, business fixed investment had been on a moderate increasing trend, and against the background of steady improvement in the employment and income situation, private consumption had been resilient despite relatively weak developments seen in some indicators. Meanwhile, the Kyushu-Okinawa region reported that the economy had been picking up moderately with the alleviation of supply-side constraints, despite its ongoing weakness, mainly in tourism, following a rapid downshift induced by the Kumamoto Earthquake.

1. With regard to the changes from the previous assessment, arrows pointing to the upper right or lower right indicate changes in the pace of improvement or deterioration compared with the previous assessments, respectively. For example, an acceleration in the pace of improvement or deceleration in the pace of deterioration is indicated with an arrow pointing to the upper right. A horizontal arrow pointing to the right indicates that the pace of improvement or deterioration in economic conditions has remained unchanged compared with the previous assessments.

As for public investment, the Kyushu-Okinawa region reported that it had gradually begun to pick up, and restoration-related construction orders also had been seen in the aftermath of the Kumamoto Earthquake. Three regions (Hokkaido, Kinki, and Shikoku) noted that it had bottomed out, the Hokuriku region reported that it had started to pick up, the Tohoku region noted that it had been at a high level, and the Kanto-Koshinetsu region reported that it was increasing. On the other hand, the Tokai and Chugoku regions reported that public investment was on a declining trend, although it remained at a high level.

As for business fixed investment, the Hokuriku and Tokai regions reported that it was increasing steadily, or increasing significantly, five regions (Tohoku, Kanto-Koshinetsu, Kinki, Chugoku, and Shikoku) noted that it was increasing moderately, or had been on an increasing trend, or was increasing, and the Hokkaido region reported that it had been at a high level. Meanwhile, the Kyushu-Okinawa region noted that business fixed investment had been at a high level, although it had shown both upside and downside movements at some firms in the aftermath of the Kumamoto Earthquake, with investment plans being suspended and investment in the maintenance and repair of damaged equipment taking place.

Meanwhile, the Hokkaido region reported that business sentiment was improving, and the Hokuriku region noted that it had generally stayed at a favorable level recently, although cautious views regarding the outlook were increasing. On the other hand, the Kyushu-Okinawa region reported that business sentiment was deteriorating, both in manufacturing and nonmanufacturing, due partly to the effects of the Kumamoto Earthquake, the Chugoku region noted that it had become somewhat cautious, and had shown deterioration in some industries, three regions (Tohoku, Tokai, and Kinki) reported that it had become somewhat cautious, and the Kanto-Koshinetsu and Shikoku regions noted that it had generally stayed at a favorable level, but some cautiousness had been observed in some industries.

As for private consumption, with the employment and income situation continuing to improve steadily, the Hokkaido region noted that it was recovering, and the Shikoku region reported that it was picking up moderately. Six regions (Tohoku, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, and Chugoku) noted that private consumption was picking up, or had been resilient, or had been firm as a whole, although relatively weak developments had been seen in some indicators. Meanwhile, the Kyushu-Okinawa region reported that private consumption had been relatively weak as a whole.

As for sales at department stores, it was noted that they had been solid, while there were reports that they had been below the previous year's level, notably in high-end products, or that they had been relatively weak recently. As for sales at supermarkets, it was reported that they had continued to improve, or had been firm. Furthermore, it was noted that sales at convenience stores had been firm, or were increasing.

As for automobile sales, it was noted that they had been below the previous year's level, while there were reports that they had been more or less flat, or had been solid.

As for sales of household electrical appliances, it was noted that they had been below the previous year's level, or that they had been relatively weak, while there were reports that they had been solid, or were picking up, or were recovering moderately.

As for travel-related demand, it was noted that demand had been relatively weak, while there were reports that it had been solid, primarily in domestic travel, or had been firm, chiefly in domestic travel. Meanwhile, it was noted that the number of foreign visitors to Japan had continued to increase, whereas there were reports that the number of both domestic and foreign visitors to Kumamoto and Oita Prefectures in particular had continued to be very slack, primarily due to the effects of the Kumamoto Earthquake on such tourism sites and those on consumer sentiment.

As for housing investment, the Shikoku region reported that movements toward a pick-up had recently paused, while the Tohoku region noted that it had been at a high level, and seven regions (Hokkaido, Hokuriku, Kanto-Koshinetsu, Tokai, Kinki, Chugoku, and Kyushu-Okinawa) reported that it was picking up moderately, or picking up.

As for production (industrial production), due mainly to the effects of the slowdown in emerging economies, five regions (Tohoku, Kanto-Koshinetsu, Kinki, Chugoku, and Shikoku) reported that the pick-up had paused, or that it had continued to be more or less flat. On the other hand, three regions (Hokkaido, Hokuriku, and Tokai) reported that it had maintained a high level, or was increasing moderately. Meanwhile, the Kyushu-Okinawa region noted that production had turned upward, assisted mainly by the restoration of production facilities and the progress in production at alternative sites, after having declined significantly due to the effects of the Kumamoto Earthquake.

With regard to production by industry, the following developments were reported. Transportation equipment had been at a relatively high level as a whole, amid a decline in production related to small cars with engine sizes of 660cc or less, or had been increasing moderately as a trend, albeit with fluctuations due to a plant accident and to the effects of the Kumamoto Earthquake, while there were reports that it was declining, or had been more or less flat. General-purpose, production and business oriented machinery, electronic parts and devices, and electrical machinery had started to pick up, as firms, which had suspended operations due to the Kumamoto Earthquake, resumed their production activity, or had been at high levels, or were increasing moderately as a whole, while there were reports that production cutbacks had been observed at some firms, or that they had shown relatively weak movements in some aspects. Meanwhile, chemicals had turned upward, or was increasing moderately. Moreover, iron and steel had held back on production cuts.

Many regions reported that the employment and income situation was improving.

Many regions reported that supply and demand conditions in the labor market had continued to improve steadily, or were tightening. As for household income, many regions noted that it was improving steadily, or increasing moderately.

Appendix: Prefectures Included in Each Region

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