Recent Economic Developments- Monthly Economic Report, April 23, 2020 -

April 30, 2020

Cabinet OfficeGovernment of Japan

(Changed)

(Changed)

April

<Assessment of the current state of the Japanese economy>

March The Japanese economy is in a severe situation, extremelydepressed by the Novel Coronavirus.

The Japanese economy is getting worse rapidly in anextremely severe situation, due to the Novel Coronavirus.

February The Japanese economy is recovering at a moderate pace,while increased weakness mainly among manufacturers iscontinuing, as exports remain in a weak tone.

April

March

1

Note: ↑ denotes upward revision and ↓ denotes downward revision.

<Assessment of the current state of the Japanese economy>February March April

Private consumption Private consumption is picking up.

Private consumption is showingweakness recently, due to the

influence of the infectious disease.(↓)

Private consumption is decreasingrapidly, due to the influence of the

infectious disease. (↓)

Business investment

Business investment showsweakness in some components,

although it is on the increase at amoderate pace.

Business investment is almost flat.(↓) Unchanged

Exports Exports are in a weak tone. UnchangedExports are decreasing recently, due

to the influence of the infectiousdisease. (↓)

Industrial production Industrial production remains in aweak tone. Unchanged

Industrial production is decreasing,due to the influence of the infectious

disease. (↓)

Corporate profitsCorporate profits are in a weak tone,

mainly among manufacturers,although they remain at a high level.

Corporate profits are in a weak tonemainly among manufacturers. (↓)

Corporate profits are decreasingrapidly, due to the influence of the

infectious disease. (↓)

Firms’ judgments onbusiness conditions

Firms' judgments on currentbusiness conditions continue

increasing cautiousness, mainlyamong manufacturers.

Firms' judgments on currentbusiness conditions are

deteriorating, due to the influence ofthe infectious disease. (↓)

Firms' judgments on currentbusiness conditions are deterioratingrapidly, due to the influence of the

infectious disease. (↓)

Employmentsituation Employment situation is improving.

Employment situation is affected bythe infectious disease although it

has been improving. (↓)

Employment situation is seen someweak movements lately, due to theinfluence of the infectious disease.

(↓)

Prices Consumer prices are rising at aslower tempo recently. Consumer prices are flat recently. Unchanged

2

<Short-term prospects>

March

April

A severe situation is expected to remain due to the influence of the infectious disease.Moreover, full attention should be given to the further downside risks to the domesticand foreign economy which are affected by the influence of the infectious disease.Also, attention should be given to the effects of fluctuations in the financial and capitalmarkets.

An extremely severe situation is expected to remain due to the influence of theinfectious disease. Moreover, full attention should be given to the further downsiderisks to the domestic and foreign economy which are affected by the influence of theinfectious disease. Also, attention should be given to the effects of fluctuations in thefinancial and capital markets.

February

Weakness remains for the time being, but the economy is expected to continuerecovering, supported by the effects of the policies, while employment and incomesituation is improving. However, full attention should be given to effects of the NovelCoronavirus on the Japanese and overseas economies. Also, attention should be givento situations in overseas economies including the situations over trade issues and theeffects of fluctuations in the financial and capital markets.

3

The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscalconsolidation simultaneously, in addition to make effort toward the reconstruction and revitalization from the Great East Japan Earthquakeand the restoration and reconstruction from the 2016 Kumamoto Earthquake.

To this end, the Government will strengthen economic growth by boosting potential growth rate and expand virtuous cycle of growth anddistribution based on the "Basic Policy on Economic and Fiscal Management and Reform 2019", the "Action Plan of the Growth Strategy"and so on. Moreover, in order to create a society in which everyone plays an active role and feels secure, the Government will establish the socialsecurity system for all generations.

The Government issued a declaration of a state of emergency in accordance with the amended Act on Special Measures for PandemicInfluenza and New Infectious Diseases Preparedness and Response on April 7th, decided to designate all prefectures subject to measuresunder a state of emergency on April 16th and the public will work together to strongly advance measures to counter the Coronavirus. Undersuch situation, the Government will swiftly implement the "Emergency Economic Measures to cope with the Novel Coronavirus~Thoroughly secure people ' s lives and move toward economic revitalization~" (Cabinet Decision on April 7th and Cabinet Decision tochange on April 20th) in order to make effort towards the early end of contagion, thoroughly secure employments, businesses and dailylives, and achieve strong economic recovery and social structural changes after the end of contagion. The Government will implement theFY2019 supplementary budget and the FY2020 budget including the temporal and special measures swiftly and steadily, and submitFY2020 supplementary budget to the Diet swiftly and work for early passage of it.

The Bank of Japan enhances monetary easing with a view to doing its utmost to ensure smooth corporate financing and maintainingstability in financial markets. The Government expects the Bank of Japan to achieve the price stability target of two percent in light ofeconomic activity, prices and financial conditions.

<Policy stance>(Monthly Economic Report,April 23, 2020)

4

0

10

20

30

40

50

60

70

2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 2 8 3 .

2007 08 09 10 11 12 13 14 15 16 17 18 19 20

(DI)

＜Global Financial Crisis＞December 2008

Current：19.0(▲4.5)Future ：21.3(▲7.0)

＜Great East Japan Earthquake＞March 2011

Current：24.0(▲25.1)Future ：25.1(▲21.2)

March 2020Current：14.2(▲13.2)Future ：18.8(▲5.8)

MonthYear

DI for judgement of current conditionsDI for judgement of

future conditions

DI by sector (current conditions)

Due the influence of the infectious disease, both current and future condition DI (diffusion index) of“Economy Watchers Survey” dropped below the lowest recorded at the global financial crisis,suggesting that business is in an extremely severe situation.

Looking at DIs by sector, bars and restaurants, and the personal services declined significantly,suggesting that they are in a severe situation. Also, employment-related DI dropped considerably,reflecting weakness in the job market.

－ Business Sentiment －

Economy Watchers Survey(Survey period: March 25 to 31)

Note: The figures in parentheses show the difference from the previous month. The figures on the left and upper right are seasonally adjusted.

Source: Cabinet Office

Employment-related comments

12.616.0

7.40.7

19.0 19.221.7

17.513.6

0

10

20

30

40

50

60

House

hold

activity

-re

lated

(Retail)

(Servic

es)

(Food an

d be

verage)

(Housin

g)

Corpo

rate ac

tivity

-re

lated

(Man

ufac

turing firm

ope

rator,e

mplo

yee)

(Non-m

anufactu

ring firm

ope

rator,e

mplo

yee)

Em

plo

yment-

related

Jan. 2020→ Feb.→ Mar.

Current conditions Key comments

▲(Slightly

bad)

The number of customers using the lodging and group bus-related services hasdecreased, and new graduates have been postponed their entry into the job. Inaddition to firms in the lodging, retail, travel, and transportation sector, therehas been an increase in consultation on employment adjustment subsidy bymanufacturers.(Tohoku, Employment Security Office)

▲(Slightly

bad)

Many companies have not been able to proceed with their recruitment activities as planned. (Kyushuu, University staff)

×(Bad)

Production in the manufacturing sector is decreasing and the number of closedfactories is on the rise. The job openings and renewal of temporary contracts are affected by slowdown. (Chugoku,Temporary staffing company)

5

2.15 2.25 2.24 2.191.701.94 2.04

2.321.62 1.47

0

1

2

3

4

Total

Manufacturing

Com

mercial

distribution

Transportation

Lodging &

Service

2019 2020y/y, % 26.3

10.2

3.1 1.8 1.805

1015202530

Manufacturing

Transport &

Postal activities

Wholesale

& R

etail

Daily life-related

services,Entertainm

ent

Accom

modations,

Eating & D

rinking services

All industriesaverage

6.4

FY Payment amount（Billion yen）

Number of people（Ten thousand）

2008 68 25 2009 6,536 2,1302010 3,249 1,0042011 2,366 7752012 1,136 461

Employment Conditions DI

Ratio of offices receiving employment adjustment subsidy(2008～2012 fiscal year)

▲ 80▲ 60▲ 40▲ 20

0204060

2008 09 10 11 12 13 14 15 16 17 18 19 20

All industries

Nonmanufacturing

Manufacturing（("Excessive employment" minus "Insufficient employment"), % pt）

Accommodations, Eating & Drinking services

CY

－ Employment Situation －

The year on year growth rate of the number of active job openings

y/y, %

Increase in wages (Spring wage negotiations: the third result)

ExcessiveInsufficient

The salary will grow at 1.94% due to corporate efforts in a difficult environment. However, the wagegrowth rate in transportation and lodging & service will be relatively low.

The year on year growth rate of the number of active job openings declined further in April 2020. The employment adjustment subsidy was effective in preserving employment at the global financial

crisis. The current key challenge is to let the heavily affected firms in the tourism, eating and drinking,and event-related industries utilize the subsidy. Thorough awareness is required.

Source: Japanese Trade Union Confederation ; Ministry of Health, Labor and Welfare ; The Japan Institute for Labor Policy and Trading ; Bank of Japan

%

▲ 11.9▲ 16.3

▲ 20.4▲ 25▲ 20▲ 15▲ 10▲ 5

0

2 3 4

2020

MonthCY

6

-47

-58 -80-60-40-20

020

1 3 5 7 9 11 1 3 5 7 9 11 1 3 4

2018 19 20

DI, percentage of profitable enterprises – operated in the red

March (result)

April (Forecast)

Corporate financial position is worse a little compared to a quarter ago. However, DI in thelodging, eating and drinking sector have deteriorated rapidly.

In March, the share of firms in the red exceeded the share of firms in the black significantly,according to the survey among small enterprises.

The number of bankruptcies in March did not increase much, however, the number ofbankruptcies related to the Novel Coronavirus have been increasing.

－ Trends in Business Activities－

The number of bankruptcies (Annual)Financial position DI（Tankan, all enterprises）“Easy”- ”Tight” Survey reference date: March 11

Profitability of small enterprisesSurvey period：April 1st to 7th

Recent Trends (Monthly) The infection related bankruptcies

740

550600650700750800850

1 3 5 7 9 11 1 3

2019 20

cases

19,16415,646

8,383

6,000

10,000

14,000

18,000

22,000

2000 02 04 06 08 10 12 14 16 18 19

cases

CY

16 13 14 15 11 18

-4

14 14 8 13 11 10 10

3 15

-28

6 10 6

-40

-20

0

20

40

All industries

manufacturing

Iron & steel

Production m

achinery

Transportation m

achinery

Nonm

anufacturing

lodging,eating

＆drinking

Services for individuals

transport

＆post

Retailing

Decemver March

1

12

45

0

10

20

30

40

50

60

Feb. Mar. Apr.(～23)

cases

（2019）CY

month

CY

month

Source: Japan Finance Corporation.Source: Tokyo Shoko Research.

7

Production is decreasing, due to the influence of the infectious disease. Automobile production in Aprilwill be shrank drastically because of the decrease in demand and the supply constraint of auto parts.

Export is decreasing, due to the worldwide decrease in demand. Moreover, it will decrease, reflecting theexpected fall in automobile production. The number of inbound tourists declined significantly because ofthe border control measures and other countries’ recommendations not to travel abroad.

The number of inbound tourists by countries and regions

-2.8 -3.8

-30.2 -35-30-25-20-15-10-50

Shipment for exports 53%Shipment for domestic products 47％

y/y,%

-58.3

-93.0 -120-100-80-60-40-20

020

10 11 12 1 2 3

2019 20

y/y, contribution, %

MonthCY

UK, Germany, France, Italy

others

China Asia NIES

North America

Total

9095100105110115120125130

889092949698

100102104106

1 4 7 10 1 4 7 10 1 4 7 10 1 3

2017 18 19 20

Forecasts.a., CY2015 = 100, 3MA

IIP(total)

Production machinery(Right scale)

Transport equipment(Right scale)

Electronic parts and devices(Right scale)

Month

CY

IIP(total, single month)

Production by Industry

Calculation of Automobile Produciton(Preliminary estimate by corporate IRs)

Sources: Ministry of Economy, Trade and Industry, Japan Automobile Manufactures Association, Ministry of Finance, JNTOFeb. Mar. Apr.

－ Industrial Production & Export －

95

100

105

110

115

120

125

1 4 7 10 1 4 7 10 1 4 7 10 1 32017 18 19 20

EU

AsiaU.S.

World

s.a., CY2015=100, 3MA

MonthCY

Export volumne index by region

February World Asia U.S. EUMonth to Month -2.9% -3.1% -1.1% -0.5%

[Export-share] [53.7%] [19.8%] [9.7%]

8

5.6

1.10246810

05

10152025

2|8

9|

15

16|

22

23|

29

30|

2/5

6|

12

13|

19

20|

26

27|

3/4

5|

11

12|

18

19|

25

26|

4/1

2|8

9|

15

1 2 3 4

（％）

Day

Month

Eating out (on business / with friend)

Domestic Travel（right scale）

（％）

2020

In March, credit card spending in eating out and travel declined further, while spending atsupermarkets increased significantly because of stocking up.

The proportion of people who spend on eating out and travel declined further through mid-April. Consumer confidence index in March showed greatest decline ever. Due to the refraining from going out, demand for travel during “The Golden Week” declined

significantly. The outlook for consumption will continue to be severe.

－ Private Consumption －

Expenditures by credit card Consumer confidence index

Proportion of people who spend

27.5 (Jan.2009)Lowest after the collapse

of Lehman Brothers

30.9（-7.4 from February）

25

30

35

40

45

50

3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 3 9 32007 08 09 10 11 12 13 14 15 16 17 18 19 20

MonthYear

5.0 14.2

-0.9

-14.2-11.1

-13.8

-15-10

-505

1015

前 後 前 後 前 後 前 後 前 後

11 12 1 2 3

(%, YoY)

Half

Month2019～2020

SupermarketEating out

Travel

Railway reservation（4/24～5/6）

Train YoY

Shinkansen -91％

Conventional line limited express

-88％

Total -90％

Comments on the “The Golden Week”（Economy Watchers Survey）

Assessments of Future

conditions

Main Comment

×(Worse)

All the Sakura tour reservations were canceled and the loss was quite large.(Tohoku: Sightseeing spot staff)

□(Unchang

ed)

Neither foreign nor domestic tourists will come during the GW holidays.(Northern Kanto: City hotel staff)

Sources: Published documents from each JR company; NOWCAST, INC.; Macromill, INC; Cabinet Office

1st 1st 1st 1st 1st2nd 2nd 2nd 2nd 2nd

9

2.2

-4-3-2-101234

10 11 12 1 2 3

2019 20

Mask(Weight: 4)

MonthCY

y/y, %

20.2130.9

120

130

140

150

160

170

102030405060708090

1 4 7 10 1 4 7 10 1 4

2018 19 20MonthCY

yen/ℓdollar/barrel

Gasoline(Right scale)

Crude oil

99100100101101102102103103104

94

96

98

100

102

104

1 4 7 10 1 4 7 10 1 4 7 10 1 3

2017 18 19 20MonthCY

Services producer price index(Right scale, base excluding overseas factor)

Producer Price Index

CY2015=100 s.a.,CY2015=100

The gasoline price dropped due to the decline of crude oil prices recording the lowest level for this year. A drop in crude oil prices and weakness in lodging fees by the influence of the infectious disease

lowered the price indices among producers. Due to the effects of the Novel Coronavirus, increase in demand for masks raised prices, and decrease

in demand for accommodations and cut flowers lowered fees and prices.

99.5

100.0

100.5

101.0

101.5

102.0

102.5

1 4 7 10 1 4 7 10 1 4 7 10 1 32017 18 19 20

MonthCY

s.a.,CY2015=100

Core CPI (less fresh food)

Core-core CPI(less fresh food and energy)

CPI

-3.2

-2.6

-6

-4

-2

0

2

4

6

10 11 12 1 2 3

2019 20

Cut flower (Weight: 8)

Accommodation fee (Weight: 113)

MonthCY

y/y, %

－ Prices －

Source: Bank of Japan; Ministry of Internal Affairs and Communications; Agency for Natural Resources and Energy; Nikkei Economic Electronic Databank System; Cabinet Office

Note: CPIs exclude direct effects of the consumption tax increase and free early childhood education and care. Producer price indices exclude consumption tax.

Trend of fuel prices CPI (Consumer Price Index)

Producer Price Index/ Services Producer Price Index Increase or decreased items in CPI

10

▲ 7.2

＋2.9

▲ 7.3

＋2.7

▲ 7.1

＋3.0

▲ 10.0

▲ 8.0

▲ 6.0

▲ 4.0

▲ 2.0

0.0

2.0

4.0

6.0

8.0

10.0

1H 2H 1H 2H 1H 2H

All industries Manufacturing Nonmanufacturing

FY 2020 : ▲2.5％ FY 2020 :

▲2.8％FY 2020 :▲2.4％

year-to-year % change

１．Sources: Bank of Japan ; Tankan２．Fixed investment etc. includes Software, R&D, and Fixed Investment excluding Land Purchasing Expenses. All Enterprises base. Figures in parentheses is revision rate from the 2019Dec survey.

Production capacity diffusion index is all enterprises base.

Corporate profits are decreasing rapidly,due to the influence of the infectiousdisease.

Business investment is almost flat.

▲ 10

0

10

20

30

40

2008 09 10 11 12 13 14 15 16 17 18 19 20

All industries

Manufacturing

Nonmanufacturing

（year）

（"Excessive capacity" minus "Insufficient capacity“,％point）

Production Capacity: Diffusion index (Tankan survey)

Fixed investment (2019FY)（2019FY Forecast of March 2020 Tankan survey）

Current Profits Plan(FY 2020 Forecast Tankan survey)

Fixed investment (2020FY Forecast)(All industries)：＋1.2％

0.0

2.0

4.0

6.0

8.0

10.0

All industries Manufacturing Nonmanufacturing

＋4.2％(▲0.8％) ＋3.4％

(▲1.9％)

＋5.1％(＋0.4％)

year-to-year % change

Insufficient

Excessive

11

Public investment holds firm.

Contracted value of public construction

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

4 7101 4 7101 4 7101 4 7101 4 7101 4 7101 4 7101 4 71013

2012 13 14 15 16 17 18 19 20

s.a., tril.yen, 3MA

Month

CY

15

20

25

30

35

40

45

50

0

20

40

60

80

100

120

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 2

2013 14 15 16 17 18 19 20

s.a., ann., thousand units, 3MA

Month

CY

Owner-occupied housing(right scale)

Housing for rent(right scale)

Housing for sale(right scale)

Total

s.a., ann., thousand units, 3MA

Source: East Japan Construction Surety Co.,Ltd.,etc.

Housing investment is in a weak tone recently.

Housing construction starts

Source: Ministry of Land, Infrastructure, Transport and Tourism.

12