Recent Economic Developments- Monthly Economic Report, July 22 2020 -

August 6, 2020

Cabinet OfficeGovernment of Japan

(Changed)

(Changed)

July

<Assessment of the current state of the Japanese economy>

June The Japanese economy is still in an extremely severesituation due to the Novel Coronavirus, but it almoststopped deteriorating.

The Japanese economy is still in a severe situation due tothe Novel Coronavirus, but it is showing movements ofpicking up recently.

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

July

June

1

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

<Assessment of the current state of the Japanese economy>May June July

Private consumptionPrivate consumption is decreasingrapidly, due to the influence of the

infectious disease.

Private consumption is showingmovements of picking up recently

as the state of emergency waslifted.(↑)

Private consumption is picking uprecently.(↑)

Business investment Business investment is in a weaktone recently. (↓) Unchanged Unchanged

ExportsExports are decreasing rapidly, due

to the influence of the infectiousdisease. (↓)

UnchangedExports are bottoming out, although

the influence of the infectiousdisease remains.(↑)

Industrial productionIndustrial production is decreasing,

due to the influence of the infectiousdisease.

Unchanged

Industrial production shows signs ofpicking up recently in some sectors,

although it is decreasing as awhole.(↑)

Corporate profitsCorporate profits are decreasing

rapidly, due to the influence of theinfectious disease.

Unchanged Unchanged

Firms’ judgments onbusiness conditions

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

infectious disease.

Firms' judgments show signs ofimprovement, although some severe

aspects remain.(↑)

Firms' judgments shows movementsof improvement, although some

severe aspects remain.(↑)

Employmentsituation

Employment situation shows someweak movements further, due to theinfluence of the infectious disease.

(↓)

Employment situation is showingweakness, due to the influence of

the infectious disease.Unchanged

Prices Consumer prices are flat recently. Unchanged Unchanged

2

<Short-term prospects>

June

July

The economy is expected to move toward picking up from an extremely severesituation, supported by the effects of the policies while the socio-economic activitieswill be resumed gradually with taking measures to prevent the spread of infectiousdiseases. However, attention should be given to the trend of domestic and overseasinfections, and the effects of fluctuations in the financial and capital markets.

The economy is expected to show movements of picking up, supported by the effectsof the policies while the socio-economic activities will be resumed gradually withtaking measures to prevent the spread of infectious diseases.However, attention shouldbe given to the risk that domestic and overseas infections would affect economies.Also, full attention should be given to the economic impact of The Heavy Rain Eventof July 2020, and the effects of fluctuations in the financial and capital markets.

May An extremely severe situation is expected to remain due to the influence of theinfectious disease for the time being, although the socio-economic activities will beresumed gradually with taking measures to prevent the spread of infectious diseases.Also, attention should be given to the effects of fluctuations in the financial and capitalmarkets.

3

The Government will make effort toward the reconstruction and revitalization from the Great East Japan Earthquake.

Through balancing the efforts to prevent the spread of the Novel Coronavirus and to increase socio-economic activities step-by-step andcoping with disasters becoming ever more severe and frequent, the Government will thoroughly secure people ' lives, daily lives,employments, and businesses with determination to avoid a return to deflation absolutely. The Government will aim to realize the high-quality economy and society that we create through building a new normal for everyday life, as the basic direction of the blueprint of aneconomy and society in a new future after we overcome the social issues that have been revealed by the recent spread of infections.

To this end, the Government decided the “Basic Policies for Economic and Fiscal Management and Reform 2020 ~ Overcoming crisistowards a new future ~”, the “Action Plan of the Growth Strategy” and so on on July 17th .

The Government will continue to implement the "Emergency Economic Measures to cope with the Novel Coronavirus " (CabinetDecision on April 20th) including the FY2020 supplementary budget, and the FY2020 second supplementary budget as soon as possible,and carefully examine the status of the disease and the economic trend in Japan and overseas and impact on people's lives, and take flexibleactions as needed without delay. The Government will swiftly compile a policy package towards the rebuilding of daily lives andlivelihoods of the disaster victim by the Heavy Rain Event of July 2020.

The Bank of Japan enhances monetary easing with a view to doing its utmost to support financing mailnly of firms and maintainingstability in financial market. 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, July 22, 2020)

4

－ Private Consumption －

Payment Progress of Special Cash Payments

Sales of eating-out

Private consumption is picking up. Consumption trends based on card spending are moving upwards. By

item, home appliance sales have increased, and sales of eating-out have picked up.

Looking at the background of consumption trends, the Payments of Special Cash payments have been

steadily progressing, and the bonuses in summer remained at the recent level although they declined

from a year ago. Consumer confidence is picking up although attention should be given to the downward

pressure due to an increase in the number of infected people since July.

Sales of 5 home appliances

21.6

29.5

16

20

24

28

32

36

40

44

1 2 3 4 5 6 72020 Month

Consumer

confidence indexBonuses in Summer

Trends in goods and services spending

-6.7

3.2 7.2

-14.7

-50

-40

-30

-20

-10

0

10

20

前 後 前 後 前 後 前 後 前 後 前 後 前

1 2 3 4 5 6 7

y/y, %

2020

Services

Total

Goods

Half

Month

1st 2nd

-39.6

-32.2

-21.9

-50

-40

-30

-20

-10

0

10

1 2 3 4 5 6

y/y, %

2020 Month

92.6 (-6.0％)

80.8

(-5.4％)

50

60

70

80

90

100

110

201314 15 16 17 18 19 20

Japan Business

Federation

Nikkei Inc.

10 thousand yen

Year

*() shows year-on-year changes

for the same company

9.3

-40

-20

0

20

40

60

80

1 3 5 2 4 2 4 2 4 1 3 1 3 1 3

1 2 3 4 5 6 7

y/y, %

2020

（1st to 4th week

average on July）

Week

Month

3.85 5.96 7.73 9.12 10.34 11.19 11.85 12.12 12.26

（30.2）

（46.8）（60.7）（71.6）

（81.2）（87.8）（93.0）（95.2）（96.3）

0

20

40

60

80

100

0

2

4

6

8

10

12

14

16

5 12 19 26 3 10 17 22 29

6 7

Trillion yen

2020

Ratio of paid amount to

budget amount (right scale)

Amount Paid

Day

Month

%

Sources: NOWCAST, INC. ; JCB Co., Ltd ; Ministry of Economy, Trade and Industry; Japan Foodservice Association ; Ministry of Internal Affairs and Communications ; Japan Business Federation ; Nikkei Inc. ;

Cabinet Office.

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

5

s.a., m to m contriobution(%)

-12-10-8-6-4-202468

1012

1 2 3 4 5 6 7 8

OtherChemicalIron, steel and Non-ferrous metalsElectronic parts and devicesProduction machinaryTransport industry

Month

Year

Forecast

405060708090100110120130

70

75

80

85

90

95

100

105

110

1 4 7 10 1 4 7 10 1 4 8

2018 19 20

Forecast

Sources: Ministry of Finance; Ministry of Economy, Trade and Industry

－ Export & Production －

50

60

70

80

90

100

110

120

130

1 4 7 10 1 4 7 10 1 4 6

2018 19 20

EUAsia

U.S.World

s.a., CY2015=100

Month

Year

Export volume index by region

June World Asia U.S. EU

Month to Month ＋4.5 ＋0.8 ＋4.3 -1.6

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

Goods exports are bottoming out after the resumption of overseas economic activities. Automobile-

related goods bottom out significantly.

According to the forecast, production bottomed out in May and begins to pick up in June and thereafter.

In particular, the increase in production of transportation industry, including automobiles, makes a

significant contribution.

Automobile-related goods

Production by industry

Contribution of production

0

20

40

60

80

100

120

140

160

180

1 4 7 10 1 4 6

2019 20

U.S.

s.a., CY2015=100

Month

Year

China EU

2020

Production machinery

(Right scale)

Transport equipment

(Right scale)

Electronic parts and

device

(Right scale)

IIP(total)

Forecast

s.a.,CY2015＝100 s.a.,CY2015＝100

Month

Year

6

－ Employment Situation －

66.25 million

(-1.07 million)

Employees who

laid off work

6.52 million

(+4.52 million)

1.78 million

＜the number of workers＞Female +100,000

Elderly people +90,000

Unemployment rate

2.6％(+0.1％ points)

42.74 million

（+940,000）

Employment status in April and May 2020 (seasonally adjusted)

Unemployed Non-labor force

(+60,000)

-11.9-16.3

-21.2-26.6

-30.3 -28.4

-40

-30

-20

-10

0

2 3 4 5 6 7

2020

（y/y, %）

Month

CY

In April, the movement toward non-labor force occurred, mainly among women and the elderly. The

number of employees who laid off work was 5.1 million, as some returned to work in May. Support for

employment adjustment subsidies is important for companies that protect employment.

The number of job offers in the private agency remained flat in June, and the decline of the number of

daily available jobs offers from a year ago at “Hello Work” narrowed in July.

Job offers index by the private agency job market

（Apr.2014＝１）

Finance

The number of active job offers

Source: PERSOL CAREER CO., LTD., Ministry of Health, Labor and Welfare; Ministry of Internal Affairs and Communications

April

May42.53 million

（-210,000）

＜the number of workers＞Female -620,000

Elderly people -330,000

66.29 million

(+40,000)

Employees who

laid off work

5.01 million

(-1.51 million)

＋12 1.97 million

Unemployment rate

2.9％(+0.3％ points)

(+190,000)＋2

2

3

4

5

1 2 3 4 5 6

2020

Trading・distribution

TotalIt・communication

Retail・dining out

Month

CY

7

In June, the labor force population increased by 60,000 while the non-labor force population decreased

by 100,000, suggesting that people gradually retuned to the labor market. The number of unemployed

decreased by 30,000, and the unemployment rate dropped by 0.1 percentage points to 2.8%.

The number of employees who laid off work decreased to 2.67 million in June.

－ Employment Situation (2) －

Source: Ministry of Internal Affairs and Communications

Employment status in June 2020 (seasonally adjusted)

Non-labor force:42.43 million（-100,000）

Employed person

66.37 million

(+80,000 )

Employees who

laid off work

2.67 million

（-2.34 million）

Unemployed

1.94 million

（-30,000）

Labor force:68.30 million (+60,000)

Population over 15 years old: 110.73 million (-40,000)

＜the number of workers＞

Female (64 and under)

+40,000

Elderly people

(65 years old and over)

-20,000

Unemployment rate

2.8％（-0.1% points）

Employment status in May 2020 (seasonally adjusted)

Non-labor force:42.53 million（-210,000）

Employed person

66.29 million

(+40,000 )

Employees who

laid off work

5.01 million

（-1.51 million）

Unemployed

1.97 million

（+190,000）

Labor force:68.24 million (+210,000)

Population over 15 years old: 110.77 million (±0)

＜the number of workers＞

Female (64 and under)

+100,000

Elderly people

(65 years old and over)

+90,000

Unemployment rate

2.9％（+0.3% points）

＋12

＋2Part of the non-labor force enters the

labor market

8

13 113 10 11 15

▲ 28

6 10 63 1

▲ 13

0 4 5

▲ 61

▲ 22▲ 7 ▲ 3

▲ 80

▲ 60

▲ 40

▲ 20

0

20

40

All in

dustries

man

ufactu

ring

Tran

spo

rtation

equip

men

t

Pro

ductio

n

mach

inery

Electrical

mach

inery

No

nm

anufactu

ring

lod

gin

g,eatin

g &

drin

kin

g

Serv

ices for

ind

ivid

uals

transp

ort &

po

st

Retailin

g

March June

▲ 40.3

▲ 25.3 ▲ 22.8

▲ 50

▲ 40

▲ 30

▲ 20

▲ 10

0

Tran

spo

rtation

equip

men

t

Pro

ductio

n

mach

inery

Electrical

mach

inery

y/y, %

Ordinary profit

－ Trends in Business Activities－

Ordinary profit by sector(2020FY Forecast)

The number of

bankruptcies (Monthly)Manufacturing Non-manufacturing

FY2019 ▲ 5.1％

FY2020 ▲18.5％

FY2019 ▲15.9％

FY2020 ▲21.9％

FY2019 ▲ 9.6％

FY2020 ▲19.8％

Y/Y

According to “Tankan Survey”, corporate profits are expected to decline further in FY2020. Profits inthe “transportation equipment”, “accommodations, eating and drinking services” and “services forindividuals” sectors are expected to drop significantly, and their corporate financial positions are worsecompared to levels in March.

Meanwhile, the government’s financial support is in steady progress. The number of bankruptciesincreased to its previous level in June, after a temporary drop in May.

314

780

200

300

400

500

600

700

800

900

1 3 5 7 9 11 1 3 5 6

2019 20

cases

month

CY

Source: Tokyo Shoko Research.Source: Bank of Japan.

0

10

20

30

40

50

60

70

2012 13 14 15 16 17 18 19 20

Non-manufaturing

FY

Manufacturing

All industries

tril. yen

Forecast

▲ 239.6

▲ 64.8

▲ 17.2

▲ 11.7

▲ 280

▲ 240

▲ 200

▲ 160

▲ 120

▲ 80

▲ 40

0

Acco

mm

od

ations,

eating an

d d

rinkin

g

services

Serv

ices for

ind

ivid

uals

Tran

spo

rt & P

ostal

activities

Retailin

g

y/y, %

Financial position DI（Tankan, all enterprises）“Easy”- ”Tight”

May

31th

June

30th

July

20th

Public financial

institutions6.9 10.0 11.4

Private financial

institutions

(interest free

loan)

2.7 6.7 9.1

Financial support from public

financial institutions (cumulative)tril. yen

9

1.Sources:Bank of Japan ; Tankan, Ministry of Economics , Trade and Industry , Investor Relations(IR)

2.Fixed investment ; Software , R&D , and Fixed Investment excluding land purchasing expenses . All Enterprises base.

▲ 10

0

10

20

30

40

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

All industries

Manufacturing

（year）

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

Nonmanufacturing

While industrial production is in low level, production capacity of both manufacturing and

nonmanufacturing is becoming excessive, so that business investment is in a weak tone.

The aggregate figure of investment plan for FY2020 suggests that companies are cautious due to the

decrease in corporate profits and to the uncertain future. However, the software investment is still solid.

Also there are some sectors which will investment for new technology and logistic facility.

Capital goods supply

Production Capacity: Diffusion index (Tankan survey)

Excessive

June 2020 survey

All industries：8（Excessive）Manufacturing：16（Excessive）

Nonmanufacturing：2（Excessive）

Sectors y/y Backgrounds

Man

ufactu

ring

Nonferrous

metals＋16.1％

New materials for latest technology(Next-generation

automobiles, semiconductor, electronics)

Food &

Beverages＋12.9％

Logistic facilities(refrigerating warehouse),improvement

of efficient production process of factory, laver-saving

Chemicals ＋10.0％Materials for lithium ion batteries to be installed on

automobiles(EVs), Optical film for electronics

No

nm

anufactu

ring

Real estate ＋5.1％Urban redevelopment, Logistic facilities, Commercial

facilities

Transport&

postal

activities

＋2.1％Upgrade of speed or safety measures of train, Real-estate

development, Logistic facilities

communicat

ions＋1.1％ Networking infrastructure, financial service

90

95

100

105

110

115

1 4 7 10 1 4 7 10 1 5

2018 19 20

Month

CY

Month to Month(3MA)

April：▲1.1％May：▲0.3％

Month

Three month

average(3MA)

s.a,CY2015＝100

－Business investment－

Insufficient

Fixed investment(2020FY Forecast)(June2020 Tankan survey)

+0.9

+2.8

▲ 1.0▲ 2.0

▲ 1.0

0.0

1.0

2.0

3.0

4.0

All industries Manufacturing Nonmanufacturing

Fixed investmentyear to year %change

+4.8 +5.0 +4.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

All industries Manufacturing Nonmanufacturing

Software investmentyear to year % change

10

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 7101 46

2012 13 14 15 16 17 18 19 20

s.a., tril.yen, 3MA

Month

CY

79.8

24.8

30.4

23.9

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 1 46

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

Housing investment is in a weak tone.

Housing construction starts

33.7

9.4

23.6

0

10

20

30

40

1 4 7 10 1 4 7 10 1 4 6

2018 19 20

Month

CY

ten thousand groups

Number of the housing exhibition visitors (couples)

Source: Ministry of Land, Infrastructure, Transport and Tourism. Housing Exhibiter Conference, The Machinami Foundation. Ministry of Economy, Trade and Industry,

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

Public investment shows steady performance.

Contracted value of public construction

Amount of public construction completed

1.0

1.2

1.4

1.6

1.8

2.0

4 7101 4 7101 4 7101 4 7101 4 7101 4 7101 4 7101 4 7101 5

2012 13 14 15 16 17 18 19 20

s.a., tril.yen, 3MA

Month

CY

11

CPI (Consumer Price Index)

Producer prices bottom out.

Consumer prices are flat.

98.5

99.0

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 4 6

2017 18 19 20

s.a., CY2015=100

Core CPI (less fresh food)

Core-core CPI

(less fresh food and energy)

CPI

Month

Year

Producer Price Index/ Services Producer Price Index

Economy Watchers Survey(Survey period: June 25 to 30)

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 6

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

(DI)

Month

Year

＜Global Financial Crisis＞ December 2008

Current：19.0(▲4.5) Future ：21.3(▲7.0)

June 2020

Current：38.8(▲23.3) Future ：44.0(+7.5)

DI for judgement of

current conditions

DI for judgement of

future conditions

97

98

99

100

101

102

103

104

1 4 7 10 1 4 7 10 1 4 7 10 1 4 6

2017 18 19 20

CY2015=100

Month

Year

Producer Price Index

Services Producer Price Index

Note: The figures in parentheses show the difference from the previous month. Producer price index and services producer price index exclude consumption tax. CPIs exclude

the direct effects of the consumption tax increase and free early childhood education and nurseries.

Source: Bank of Japan; Ministry of Internal Affairs and Communications; Cabinet Office

DI for judgement of current conditions

DI by sector (current conditions)

43.347.039.0 39.6

32.1 30.4 30.0 30.3 27.4

-10

0

10

20

30

40

50

60

Ho

useh

old

activity

-related

(Retail)

(Serv

ices)

(Fo

od

and

bev

erage)

(Ho

usin

g)

Co

rpo

rate activity

-related

(Man

ufactu

ring firm

op

erator,em

plo

yee)

(No

n-m

anufactu

ring

firm

op

erator,em

plo

yee)

Em

plo

ym

ent-related

Apr. 2020→ May.→ Jun.

12