Outlook for the Japanese Economy in Fiscal 2016 and Fiscal 2017 (as of May 2016)

Transcription

1 17 June 2016 Economic Report Outlook for the Japanese Economy in Fiscal 2016 and Fiscal 2017 (as of May 2016) The Economy Is Improving Gradually, but There Is a Risk It Will Remain Virtually Flat for a Prolonged Period 1. Current State of the Economy: The Economy Is Basically Flat The real GDP growth rate for the January-March quarter of 2016, which was announced on May 18, 2016, was +% over the previous quarter (+1.7% at an annualized rate), thus turning positive for the first time in two quarters. As a result of the effect of the leap year, personal consumption, government consumption, and other components of the GDP show firm expansion, thus pushing the overall growth rate upward. Although the economy averted slipping into a downturn, since the beginning of 2015, quarterly growth rates have alternated between positive and negative, but, on average, the economy remains virtually flat. Examination of the real GDP data in greater detail shows personal consumption expanded % over the previous quarter, apparently because of the diminishing impact of unseasonable weather and the boost to the economy provided by the leap year. If we consider that worker compensation (in real terms, seasonally adjusted) rose a relatively high 1.3% over the previous quarter and that consumption declined 0.8% in the October-December quarter, the recovery in consumer spending is definitely not robust. In addition, the deflator for consumption decreased a sharp % from the previous quarter (and was down % year on year), thus boosting the real figure, and consumption in nominal terms decreased % from the previous quarter, the second consecutive quarterly decline. This suggests that consumers are holding on to their purse strings tightly because of the growing propensity toward frugality and a deterioration in consumer confidence accompanying the decline in stock prices and other factors. Despite recent improvement in housing starts, the positive impact of this on residential housing investment will take time, and, in the interim, housing investment declined 0.8% from the previous quarter for the second consecutive quarterly decline. In the corporate sector, private capital investment declined 1.4% from the previous quarter, the first drop in three quarters. This may have been due to a pause in the improvement in corporate performance, principally in the manufacturing sector and increased caution of companies regarding new investments. 1 / 16

2 Turning to inventory investment, the contribution of inventory investment to real GDP growth for the quarter was percentage point, or virtually level with the previous quarter because of the accumulation of inventory in the distribution chain and other factors. As a result of the developments mentioned, although the contribution of the private sector as a whole to GDP for the quarter turned slightly positive, it was only + percentage point. On the other hand, the contribution of the public sector was + percentage point, the first positive figure in three quarters. There is a possibility that, as a result of the effect of the leap year, government services, including medical costs, were boosted, and government consumption rose % over the previous quarter. In addition, public works investment, which had been on a declining trend along with the diminishing of the effects of government policy measures, showed a turnaround and rose %. Exports also shifted direction and rose % from the previous quarter, but the pace of increase remained moderate. Although the upward trend in consumption by foreign tourists in Japan continued, exports of goods were weak because of the slowdown in overseas economies. On the other hand, reflecting weak domestic demand, imports decreased % for the quarter, the second consecutive quarterly decline. The contribution of the external sector was +%, thus helping to boost the growth rate for the third consecutive quarter. The GDP in nominal terms rose a relatively firm % over the previous quarter (+% at an annualized rate). In addition, the GDP deflator, which reflects comprehensive price movements in the overall economy, stood at +% over the same period of the previous year (+% over the previous quarter after seasonal adjustment), a weaker rate of increase than the +% reported in the October-December quarter. As a result of the decreases in crude oil and other resource prices, import prices have dropped substantially, thus raising the overall level of the deflator. However, this was more influenced by the substantially larger decline in the deflator for domestic demand, which stood % below the same period of the previous year, compared with the % reported in the previous quarter. In the April-June quarter, the real GDP growth rate is not expected to be high, although there is a strong possibility that residential investment and public works investment will expand. Although the income environment for households will continue to improve, there is a strong possibility that the stagnation in stock prices and concerns about the future course of the world economy will restrain consumer spending by causing a deterioration in consumer confidence. Therefore, it will be difficult for the pace of improvement in consumption to rise suddenly. In addition, judging from the trends in the world economy, a high rate of expansion in exports cannot be expected, and, as the improvement in corporate performance pauses, there will be limits on growth in capital investment. In addition, the negative impact of the Kumamoto earthquakes will emerge, principally in production activities. For this reason, even though the economy improves, there will be no powerful driver, and there is a strong possibility that the pace of improvement will be moderate. 2 / 16

3 Note that, while the GDP growth rates announced this time are by no means strong, economic conditions have not deteriorated as much as after the collapse of Lehman Brothers and Great East Japan Earthquake. Moreover, current conditions are not sufficient to bring consideration of whether the increase in the consumption tax rate to 10% should be postponed or not. However, it is clear that the trends in the world economy are not robust, and the view that fiscal stimulus will be necessary around the world is becoming stronger. Amid this operating environment, even at the Iseshima Summit held on May 26 and 27, this is very likely to be an issue for discussion. The administration of Prime Minister Shinzo Abe, after considering these discussions and the schedule of political events, will make a judgment on whether or not to postpone the increase in the consumption tax rate to 10%. In the last analysis, it is likely that the increase in the consumption tax rate will be judged to be irrelevant to the GDP growth rate results recently announced, and there is a strong possibility that the increase may be postponed. (Qr/Qr, %) 3.0 Chart 1. Real GDP growth rate by demand (Quarterly) - Private Consumption - Private Capital Investment Government Expenditure Inventory Investment -3.0 Exports Imports Real GDP Source: Cabinet Of f ice "Quarterly Estimates of GDP" (Quarterly) 2. Outlook for the Japanese Economy in Fiscal 2016 and Fiscal 2017: Although Moderate Improvement May Continue, There Is a Risk that the Economy Will Remain Virtually Flat for a Prolonged Period Up until our previous outlooks issued up to March 2016, we had assumed that the consumption tax would be increased as scheduled to 10% in April 2017 and that a supplementary budget for fiscal 2016 would be formulated with economic policies in view of the upcoming consumption tax increase. However, in the outlook this time, we have assumed that the consumption tax hike will be postponed for two years until April As a result, since the surge in demand prior to the proposed tax increase and the subsequent slump in demand will not occur, we have lowered our for the real GDP growth rate for fiscal 2016 and increased our for fiscal 3 / 16

4 2017, and we have also assumed there will be no boosting effect due to the postponement of the consumption tax hike. In fiscal 2016, as we approach the end of the fiscal year, the outlook is for the growth rate to rise gradually, and year-on-year positive growth of 0.8% in real GDP is expected to continue (Chart 2). However, the acceleration in the pace of improvement will begin in the summer, and, at the beginning of the fiscal year, the economy will remain virtually level. The improvement in the economy will be due to continued gradual recovery in exports along with recovery in overseas economies, rallying of corporate and consumer confidence as concerns about a loss of momentum in overseas economies recede, and expectations of improvement in domestic demand emerge. Note that, after the exclusion of the carryover effect of +%, growth during the fiscal year as a whole is to be +%. Turning to the world economy, the high valuation of the U.S. dollar has been corrected as markets have taken account of the postponement of increases in interest rates in the United States. The currencies of the emerging economies and resource-producing nations, which investors had been selling, are growing stronger, and the turmoil in international money markets has generally subsided. In addition, the outflow of funds from the emerging and resource-producing countries has paused, and it has become possible to ease monetary conditions. Moreover, the prices of crude oil and other resources have already begun to rise in anticipation of increases in demand. For these reasons, concerns about a deceleration in the world economy have receded, and clearer signs of recovery are expected as we move into the summer. Given these developments, exports mainly of automobiles, general machinery, electronic components and devices, and other products are expected to recover, and this will be a factor supporting the economy. In addition, as consumer spending moves to a rising trend against a background of improvement in incomes along with a tightening of the supply and demand balance for labor, this will provide support for the economy. Conditions in labor markets are expected to remain favorable, and, along with increases in the number of employed persons, the outlook is for wages in nominal terms to continue to rise. Since households have increased consumption with little growth in wages, the average propensity to consume has been high compared with previous averages, but adjustments have continued in fiscal 2015, and, currently, the propensity to consume has declined to the level of previous averages. For this reason, consumption is to increase in step with the rises in incomes. Moreover, the recovery in the world economy and stability in financial markets are expected to bring a gradual improvement in consumer confidence, and the trend toward frugality will recede. On the other hand, the deterioration in the business environment will have influence corporate performance, and this will be a negative factor. However, as a result of the declines in crude oil and other resource prices during fiscal 2016, marginal profit ratios will continue to improve, and corporations will be able to sustain the high-profit conditions they have created as a consequence of restructuring. For these reasons, it appears that corporations will be able to avert a sharp drop in profitability. In addition, since corporations will continue to show ample cash 4 / 16

5 flows, even as companies remain cautious about making capital investments in Japan, the increase in private capital investment is likely to continue. Note that, after the introduction of negative interest rates, there is a possibility that lending rates will decline further, but since these rates are already sufficiently low, we should not expect lower rates to boost the demand for funds in the corporate sector. Public investment will rise temporarily as a result of the positive impact of the supplementary budget for fiscal 2015 and the accelerated usage of government budget allocations, but, after these factors run their course, declines in public investment will continue. There is a possibility that demand related to the 2020 Tokyo Olympics may emerge, but its effectiveness in raising public spending on a year-on-year basis will be limited. The biggest risk factor during the fiscal year will be further deceleration in overseas economies. If the trend toward deceleration in the emerging and resource-producing countries grows stronger and exports begin to decline, the risk of the economy remaining virtually flat for a prolonged period will rise. (Yr/Yr, %) Chart 2. Real GDP growth rate by demand (Fiscal year) Forecast (Fiscal Year) Source: Cabinet Of f ice "Quarterly Estimates of GDP" Imports Exports Inventory Investment Private Capital Investment Government Expenditure Private Consumption Real GDP In fiscal 2017, a moderate recovery trend in the economy will continue, and real GDP growth rate is to rise to +% over the previous year. Against a background of further improvement in employment and income conditions, consumer spending will gradually improve, and, along with improvement in corporate performance, the rising trend in private capital investment will continue and will provide support for the economy. Also, as overseas economies continue to recover, increases in exports are to continue. After the exclusion of a carryover effect of +%, growth during the fiscal year as a whole is to rise to +0.8%. 5 / 16

6 The outlook for principal sectors and other economic indicators is as follows. (1) Households As structural demographic change occurs, with the productive-age population (15 to 64 years) decreasing, the supply and demand balance for labor during the period is expected to remain tight, and, in some industries, the feeling that labor is in short supply will likely become more serious. The unemployment ratio is to be low and stable, and, compared with 3.3% in fiscal 2015, the ratio in fiscal 2016 and 2017 is to remain at about 3.3%. Reflecting the increasing participation of women and seniors in the workforce, the outlook is for the number of employed persons to increase gradually. Although employment conditions like these are supposed to make it easier for wages to rise, the environment for corporations is becoming severe, and, even though they raised base wages in the 2016 spring labor offensive also, for the third consecutive year, the rate of increase was smaller than in the previous year. For this reason, in fiscal 2016, although total worker cash compensation will increase, the margin of increase will be a moderate % over the previous year, and households may find it difficult to sense that wages have gone up. Also, regarding the summer and winter bonuses, a substantial increase cannot be expected. In addition, as the business environment for corporations becomes even severer in fiscal 2017, it seems likely that similar trends will hold, and the increase in total worker cash compensation will remain at a low +%. However, although growth in per capita wages will be sluggish, the number of employed persons will continue to rise. Therefore, following the firm increase of 1.7% in nominal employee compensation in fiscal 2015, the increase in fiscal 2016 is to be 1.8%, and will be followed by 1.4% in fiscal Real worker compensation, which rose 1.7% in fiscal 2015, is to increase % in fiscal 2016 as price levels remain stable. However, since the rate of price increases will move upward in fiscal 2017, the rate of increase in real worker compensation is to decline to 0.8%. With these increases in real income in the background, consumer spending in fiscal 2016 is to rise gradually approaching the end of the fiscal year, and, compared to the decline of % in fiscal 2015, it will rise % in fiscal 2016, for the first time in three years. In fiscal 2017, the rate of increase is to rise further to %. In housing, the number of new housing starts is currently rising, but the momentum will likely diminish gradually. Although housing loan rates are at the lowest level in history, the continuing rise in housing prices is restraining growth in sales. In addition, growth in starts of new rental housing, which boosts the total, may have run its course. In fiscal 2016, housing starts are to be slightly above the 921,000 units recorded in fiscal 2015 and rise to 926,000, but then decline to 920,000 in fiscal / 16

7 (2) Corporations The operating environment for corporations is becoming severer, and the improvement in corporate performance may pause in fiscal Within the corporate sector, manufacturing has been adversely affected by the decline in sales accompanying the rise in the value of the yen. Although prices of crude oil and other raw materials have bottomed out, since it will take time for this to have an effect on corporate profitability, during fiscal 2016, the terms of trade will continue to improve and boost profitability. However, as sales show little growth and fixed costs, including personnel costs, rise, ordinary profit is to show a small decline of %, the first decrease in this figure in five years. In fiscal 2017, although sales will improve along with recovery in domestic and overseas demand, ordinary income is to rise only a small % as the increase in raw material costs causes a deterioration in the terms of trade and personnel costs continue to rise. In view of these trends, capital investments are expected to remain on an upward trend, but the rate of growth will be moderate. With ample cash on hand, companies are expected to resume some investments, and this will provide support for the economy. These will include investments that companies have been postponing, investments for coping with labor shortages, investments for maintaining competitiveness, investments for the maintenance and replacement of existing equipment, and investments in IT systems and software. It is also possible that demand for investments that may have little to do with the economy, such as expenditures related to the introduction of the My Number social security number system and investments to improve security systems, may increase. Investments in areas where supply shortages exist, including the construction of hotels, office buildings, warehouses, and logistics centers are expected to remain firm. However, companies are expected to continue to refrain from aggressive investments to increase capacity in Japan, and this will preclude any major increases in investment. Although some companies and industries are seen as likely to move production facilities they had previously located overseas back to Japan, this trend is not widespread across industries, and, as a result of the sudden appreciation of the yen after the beginning of 2016, there is a possibility that this trend may diminish. In addition, if lending interest rates decline following the introduction of negative interest rates, corporations have ample cash reserves, and the level of rates is already low, it seems unlikely that this will kindle the desire to invest among corporations. Real private capital investment, which rose 1.6% in fiscal 2015, is to slow and rise only % over the previous year in fiscal In fiscal 2017, although investment is to rise 2.1% and continue its rising trend, the cautious stance of corporations regarding new investments is likely to continue, and a sudden acceleration in capital investments is unlikely. (3) Government Public investment has already peaked out, in part because expenditures for recovery and reconstruction following the Great East Japan Earthquake have run their course. In fiscal 2016 also, although there may be an increase at the beginning of the fiscal year as the supplementary budget for fiscal 2015 is implemented and some budget 7 / 16

8 allocations are implemented earlier, thereafter, public investment will decline gradually. Government expenditures related to recovery and reconstruction following the Kumamoto earthquakes are expected to provide only a limited boost for the economy because the amounts will be relatively small and the timing of expenditures will be dispersed. Although there is a possibility of the formulation of a second supplementary budget, it is believed likely that the focus of government expenditures will be shifted implementing the government s growth strategy, including the so-called Promoting Dynamic Engagement of All Citizens initiatives, and these expenditures will have only a limited positive impact on public investment. For this reason, government public works spending is to decline 0.8% in fiscal 2016, the third consecutive year of decline. In fiscal 2017, since the trend toward improvement in the economy will continue, no major government spending policies will be formulated, and the decline in public investment will continue, with spending declining 2.3% for the fiscal year, the fourth consecutive year of decline. However, there is a possibility that demand related to infrastructure for the Tokyo Olympics may begin to emerge gradually, and these expenditures may bottom out at the end of fiscal Regarding government consumption expenditures, since growth accelerated in the latter half of fiscal 2015, there is a possibility that these expenditures will rise only gradually in the first half of fiscal 2016, but as demographic aging of the population continues, there is a strong likelihood that the rising trend will continue, mainly for medical expenditures. (4) External Sector Owing to the deceleration in overseas economies, there is a possibility that exports will show weakness for the time being in 2016, but with improvement in the world economy, the rate of increase in exports is expected to rise moderately from summer onward. This trend is likely to continue in fiscal 2017 as overseas economies show improvement, and the pace of increase will rise gradually. However, a sharp rise in export growth should not be expected because of the impact of the relocation of many production bases overseas. The movement seen in some manufacturing industries of bringing production facilities back to Japan to avert increases in import costs will be on a small scale, and it is unlikely there will be a major movement toward resuming exports from Japan. Regarding overseas economies, as the timing of further increases in U.S. interest rates has been pushed forward, the high values of the dollar have been corrected, and the trend toward outflows of funds from the emerging countries has been halted. In addition, along with these trends, the turmoil in financial markets has quieted down as evidenced by improvement in stock prices in various countries. Although concerns about the future directions of the world economy will likely remain, trends toward improvement are expected to strengthen from summer onward. Since recovery in the U.S. economy will continue, interest rates there will ultimately be raised, but since the pace of increase will be moderate, the impact will not be to cause turmoil to spread again in international markets. In China, the downward trend in growth rates will continue, but factors providing support for the economy will include further decreases in interest rates by the People s Bank of China and lowering of bank 8 / 16

9 deposit reserve ratios. Additional support from the government will also come from the implementation of economic policies, including the One Belt, One Road concept (the Silk Road Economic Belt and the 21st Century Maritime Silk Road plans) as well as China s 13th five-year plan. On the other hand, reflecting the relatively slow pace of increase in Japan s domestic demand, growth in imports will be moderate. As a consequence, the contribution of external demand to GDP growth is to remain a small but positive +% in both fiscal 2016 and fiscal Turning to imports, the impact of the increase in energy fuel imports for generating electric power, including the rise in LNG imports following the Great East Japan Earthquake, has run its course, and, henceforth, the rise in imports is expected to continue to be in line with domestic electric power demand. However, since prices of crude oil and other raw materials will continue to rise, the value of imports will remain on an upward trend. As a result, the recent surpluses in Japan s trade balance will gradually diminish, and the trade balance is to move into the red in the latter half of fiscal (5) Production The index of industrial production in the January-March period of 2016 decreased % from the previous quarter, the first decline in two quarters. As a consequence, industrial production in fiscal 2015 fell %, and this was the second consecutive year of decreases. Factors accounting for this were lackluster growth in exports because of weakness in overseas economies; continued sluggish trends in domestic demand, mainly in consumption; and the trends toward cutting domestic production and moving production bases offshore even when the yen was weakening. In the April-June quarter also, certain industries have been obliged to make reductions in production, including the automobile industry, because of the impact of Kumamoto earthquakes, and there is a possibility this will result in declines in production from the previous quarter. Also, the level of inventories is still high, and this is likely to be a factor restraining production. From the summer onward, production is to bottom out as automobile production makes a comeback and exports show improvement; the pace of increase will be sluggish, and there is a possibility that industrial production in fiscal 2016 will decline % from the previous fiscal year, which would be the third consecutive year of declines. In fiscal 2017, since the trend toward improvement will continue, industrial production is to increase 1.8% over the previous fiscal year. (6) Commodity Markets, Foreign Exchange, and Prices In 2015, the price of crude oil plunged because of predictions of a decline in demand caused by uncertainty regarding the future course of the world economy and a sense of excessive supply worldwide caused by the decision by OPEC not to decrease production, the plateauing of shale oil production at a high level, the resumption of oil exports from Iran, and other factors. However, after the beginning of 2016, some oil-producing countries made moves toward freezing any increases in production, and crude oil prices turned upward. However, 9 / 16

10 under current circumstances, there is a tendency to think oversupply conditions will persist, and the possibility remains that the market may soften again. Nevertheless, since demand will rise bit by bit as the world economy recovers, moderate improvement seems likely to continue. However, as growth in crude oil demand will be gradual, because of the trends toward energy conservation and improved automobile gas mileage, and since the oil-producing countries, including the OPEC nations, are adopting a cautious stance to reducing oil production, the outlook is for the pace of increase in crude oil prices to be gradual. Regarding the yen/u.s. dollar exchange rate, as a result of the worldwide tendency to avoid risk-taking, the yen rose in value from the middle of In the midst of the outlook for a gradual pace of interest rate increases in the United States, the possibility remains that the yen may appreciate again as we move into the latter half of However, with the possibility that Japan may undertake another round of monetary easing measures, if improvement in the world economy proves to be solid, it is conceivable that the tendency toward greater risk taking may strengthen, and, thereafter, the yen may begin to weaken. However, Japan s current account surplus is rising again, suggesting that the pace of yen depreciation will be gradual. As a result of the influence of the decline in crude oil prices and other factors, energy prices in Japan have declined, and the year-on-year rates of change in the consumer price index (CPI) (excluding fresh foods) are now negative compared with the previous year. Although crude oil prices have bottomed out, they remain low in comparison with levels in the same periods of the previous year. As a consequence, year-on-year declines in the CPI (excluding fresh foods) are expected to continue in 2016 because of the drop in energy prices. However, the margins of decline are not expected to increase substantially, since service prices are rising, reflecting increases in wages. As a result, there is little concern about the return of a deflationary spiral. Beginning in 2017, since energy prices are expected to rise, the year-on-year negative figures are likely to be corrected. Nevertheless, the margin of increases in consumer prices will be moderate because it will be difficult for companies to pass on their cost increases to consumers as consumers tend to become more frugal and the stronger yen lowers import prices. The CPI (excluding fresh foods) rose slightly by +% in fiscal 2015, but is to decline % in fiscal 2016, and then rise by 0.8% in fiscal Note that the basis of the Bank of Japan (BOJ) s contention that price trends are rising is that the CPI (excluding fresh foods and energy) is rising at an annual rate of more than 1%. The CPI stood +% over the same month of the previous year in March However, as a consequence of the decline in import prices since the beginning of 2016, the rise in the CPI (excluding fresh foods and energy) has slowed gradually, and the outlook is for it to fall below +% toward the end of (7) Financial Policy and Interest Rates Since it will be difficult to achieve the target rate of inflation in the CPI during the period, the BOJ is likely to continue its quantitative and qualitative easing policy with negative interest rates and continue to purchase Japanese government bonds (JGBs) in line with its objectives. However, it will not be possible for the BOJ to 10 / 16

11 continue to buy JGBs indefinitely. Moreover, there is a possibility that its purchases of JGBs will not proceed as planned, since minus interest rates will apply to proceeds from bonds sold, and, in the midst of difficult conditions for fund management, the incentive to continue to hold JGBs will rise, even though the BOJ may adopt a posture of buying them at a high price. For this reason, it is conceivable that the BOJ s quantitative and qualitative easing policy with negative interest rates will reach an impasse, and there is a strong possibility that revisions in monetary policy may have to be considered. In that case, it is conceivable that the existing monetary easing framework may be continued, but the BOJ will be obliged to switch to a policy of reducing the pace of its asset purchases and maintaining the existing balance. Regarding future monetary policy, as there may be downward pressures on the CPI, the BOJ is expected to implement necessary measures to lower rates to % as of July 2016 and then to % in the January-March quarter of 2017 as well as push the date for attainment of its inflation targets further into the future. However, expanding the negative margin on interest rates may involve a risk of creating turmoil in financial markets and cause uncertainty among corporations and depositors. Therefore, it is possible that lowering interest rates further may be impossible. Regarding short-term interest rates, following the introduction of the negative interest rate policy, the unsecured overnight interbank call rate became negative, and, as the volume of transactions in the call market has fallen drastically, the rate of expansion in the negative margins is gradual. Looking forward also, there is a possibility that the volume of transactions with negative interest rates in the interbank market may not increase significantly and expansion in the negative margins will not permeate the market. On the other hand, regarding long-term interest rates, since conditions for fund management are difficult, demand for super long-term JGBs with positive interest rates is rising and the expectation is that the BOJ will purchase them at a premium. As a consequence, yields on newly issued 10-year government bonds are decreasing. Looking ahead, tight supply and demand conditions are expected to continue, and, for this reason, there is a possibility that rates on very long-term JGBs may become negative. However, there is a feeling that market conditions are overheating, and, when the time comes for the BOJ to implement revisions in monetary policy, there is a risk that interest rates may rise sharply for a temporary period. 11 / 16

12 GDP demand Economic Outlook for fiscal Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Nominal GDP Real GDP Contribution of domestic demand -1.6 Private consumption Housing investment Private capital investment Contribution of inventory investment - - Government expenditure Government final consumption expenditure Public investment Contribution of external demand Export of goods and services Import of goods and services GDP deflator / 16

13 Overseas economy and market data Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Real GDP (US) (CY) Real GDP (Euro zone) (CY) Real GDP (Asia) Real GDP (China) Yen/U.S.Dollar Uncollateralized call rates (O/N) (%)* TIBOR (3months) Newly issued government bond yields (10years) (%) WTI future price (near month contract, US dollar/barrel) Dubai crude oil prices (US dollar/barrel) * actual=average, =end of period External demand (export and import) Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Value of exports (Yen base) Ammount (Yr/Yr,%) Value of imports (Yen base) Ammount (Yr/Yr,%) Balance (trillion yen) Current account balance (trillion yen) balance on goods (trillion yen) balance on service (trillion yen) balance on income (trillion yen) Corporations Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Industrial production Inventory index Sales Ordinary Profits / 16

14 Income and emploiment Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Income per capita Scheduled - Non-scheduled Wage increase rate (%) Employee 0.8 Nominal compensation of employees* Unemployment rate (%) *GDP base Goods prices Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () Domestic corporate goods prices excluding tax effects Consumer prices excluding tax effects excluding freshfood excluding tax effects excluding food (excluding alcoholic beverages) and energy - New housing starts annualized, ten thousand units New housing starts Owned Rented Built for Sale Yr/Yr % FY 2014 FY 2015 FY 2016 FY 2017 (actual) () () () / 16

15 Economic Outlook (Quarterly) Qr/Qr,% Yr/Yr,% FY 2014 FY 2015 FY 2016 FY (Qr/Qr,%) Nominal GDP Annualized rate (Yr/Yr,%) (Qr/Qr,%) Real GDP Annualized rate (Yr/Yr,%) Contribution of domestic demand (Qr/Qr,%) Private consumption Housing investment Private capital investment Contribution of inventory investment (Qr/Qr,%) Government expenditure Government final consumption expenditure Public investment Contribution of external demand (Qr/Qr,%) Export of goods and services Import of goods and services GDP deflator (Yr/Yr,%) Overseas economy and market data FY 2014 FY 2015 FY 2016 FY Real GDP (US) (Annualized Qr/Qr rate,%) Real GDP (Euro zone) (Annualized Qr/Qr rate,%) Real GDP (Asia) (Yr/Yr,%) Real GDP (China) (Yr/Yr,%) Yen/U.S.Dollar Uncollateralized call rates (O/N) (%)* TIBOR (3months) Newly issued government bond yields (10years) (%) WTI future price (near month contract, US dollar/barrel) Dubai crude oil prices (US dollar/barrel) * actual=average, =end of period External demand (export and import) Yr/Yr % FY 2014 FY 2015 FY 2016 FY Value of exports (Yen base) Ammount (Yr/Yr,%) Ammount (Qr/Qr,%) Value of imports (Yen base) Ammount (Yr/Yr,%) Ammount (Qr/Qr,%) Balance (trillion yen) Current account balance (trillion yen)* Balance on goods (trillion yen)* Balance on service (trillion yen)* Balance on income (trillion yen)* *seasonally adjusted 15 / 16

16 Corporations Yr/Yr % FY 2014 FY 2015 FY 2016 FY Industrial production Inventory index (Qr/Qr, %) (Qr/Qr, %) (Yr/Yr, %) (Yr/Yr, %) Sales Ordinary profits Income and emploiment Yr/Yr % FY 2014 FY 2015 FY 2016 FY Income per capita - Scheduled - - Non-scheduled Real wage indices Employee Nominal compensation of employees* Unemployment rate (%) GDP base Goods prices Yr/Yr % FY 2014 FY 2015 FY 2016 FY Domestic corporate goods prices excluding tax effects Consumer prices excluding tax effects excluding freshfood excluding tax effects 1.2 excluding food (excluding alcoholic beverages) and energy New housing starts annualized, ten thousand units Yr/Yr % FY 2014 FY 2015 FY 2016 FY New housing starts Owned Rented Built for Sale This report is based on information believed to be reliable, but we do not guarantee its accuracy. This report is intended only for information and should not be construed as solicitation to take any action such as purchasing/selling/investing financial market products. In taking any action, each reader is requested to act on the basis of his or her own judgment. Use of this report is limited to "reproduction for personal use" or "quotation" as stipulated in the Copyright Law. For such use, please explicitly cite this report as the source of the information or quotation. Any use that exceeds the scope of "reproduction for personal use" or "quotation" requires explicit permission for such use from us prior to its use. 16 / 16