According to the Monthly Economic Report released by the Cabinet Office, Government of Japan in September 2002, the Japanese economy is expected to move towards an incipient recovery in the short run. Although private consumption is not increasing, positive trends can be observed in some areas. Exports are showing an increase; and the pace of an incipient recovery in industrial production has become moderate. 

TRENDS IN JAPANESE ECONOMY

Consumption and Investment

Real GDP (gross domestic product) in the second quarter of 2002 was 0.6 percent (at an annual rate of 2.6 percent) higher than in the previous quarter, despite the negative growth of equipment of private firms, mainly because of the growth of net exports (exports minus imports) of goods and services. Nominal GDP was 0.1 percent lower than in the previous quarter.
Personal consumption, as observed from movements in both the demand and supply sides, has reached a plateau, but improvement can be observed in some areas. Although personal consumption as a whole has yet to move on an increasing trend, increases have been seen in some businesses and expenditure items, reflecting an improvement in consumer confidence.
As for movement on the demand side, robust movement has been seen since last autumn. Consumer confidence shows movements of an incipient recovery, although it remains at a low level.

Capital investment, which has been decreasing since the beginning of 2001 due partly to declines in production and corporate earnings, is showing signs of bottoming out.

Exports to Asia, among other areas, are increasing. Imports are increasing slightly. The surplus in the trade and services balance is increasing. Exports have increased as a whole, as exports of electrical devices, mainly electronic components like semiconductors and general machinery are on an increasing trend and exports of transportation equipment are steady, reflecting a worldwide economic recovery. By region, exports to Asia, especially of electrical devices, general machinery and transportation equipment rose. As for the outlook for exports, the moderate improvement in the world economy is likely to support Japanese exports.

Imports as a whole increased slightly, as imports of IT-related machinery equipment climbed because of a pickup in production, mainly of electrical machinery. By region, imports from Asia increased, as imports of machinery equipment and chemical products remained firm.

Looking at the international balance of payments, the surplus in the trade and services account has grown, as the increase in export volume has been larger than the increase in import volume.

Industrial Production

Industrial production, which had increased for two consecutive quarters reflecting an increase in exports and an almost completion of inventory adjustment, has remained at the same level.