Let me note that there is severe price competition among commoditized goods and services that firms provide, and thus firms need to take initiatives to develop capital goods, materials, or parts with high technology, or unique high value-added goods or services with high brand value.
Exports would likely continue their increasing trend for the time being, as those of capital goods and IT-related goods were likely to be firm, and thereafter were expected to continue their moderate increasing trend, with the growth in overseas economies continuing.
Regarding private business fixed investment, such investment on a GDP basis has been slow to increase so far despite a pick-up in monthly indicators, such as shipments and the aggregate supply of capital goods, and the firmness in investment plans suggested by the results of the Tankan Short-Term Economic Survey of Enterprises in Japan.
Many members said that business fixed investment continued to increase, as evident from the fact that shipments of capital goods were strong and machinery orders and construction starts, leading indicators of business fixed investment, continued their uptrend.
Business fixed investment continues to fall sharply, with shipments of capital goods(excluding transport equipment) in July decreasing by 1.3 percent from the previous month reflecting the severe situation in corporate profits and the strong sense of excessive capital stock among firms.
Looking at the developments by region, exports to the United States registered a sizeable increase, since capital goods and parts have increased in reflection of the recovery there in business fixed investment. Exports to Asia have also increased, mainly in IT-related goods and in capital goods and parts.
Shipments of capital goods(excluding transport equipment) continued to increase in the July-September quarter as in the April-June quarter. However, the pace of increase was moderating due partly to a slowdown in shipments of IT-related goods such as semiconductor manufacturing equipment.
A few members expressed the view that although some indicators, for example, shipments of capital goods, were not strong, the Financial Statements Statistics of Corporations by Industry, Quarterly and some indicators to be released in the near future could confirm that the rising trend in business fixed investment was firm.
Shipments of capital goods(excluding transport equipment) increased substantially, with the monthly average for the October-November period up by 7.0 percent from that for the July-September quarter. This was due to large spot shipments in addition to the rise in shipments of semiconductor fabrication machines and equipment and of computers.
By region, exports to the United States and Asia have increased. As for the United States, exports of capital goods and parts used in overseas production sites have been increasing, and, as for Asia, exports of capital goods and parts as well as IT-related goods have been increasing.
As capital goods and parts account for a large part of exports and industrial production in Japan, if demand for those goods decline due to weakening activity in the manufacturing industry worldwide, the resultant effects will tend to be large.
With regard to the increase in crude oil prices, one member pointed out that investment in infrastructure such as oil-related plants by OPEC members, whose fiscal balances had improved, had been exerting upward pressure on the world economy through an increase in exports of capital goods from industrial countries to oil-producing countries.
Another member pointed out that the continued expansion of IT-related exports and imports was at a turning point, and that domestic production and exports of producer goods and imports of capital goods were likely to decrease.
This is because it is forecasted that the growth rate of the world trade volume will accelerate gradually with the further recovery in overseas economies, and that Japan's share of exports will increase moderately, due in part to a worldwide recovery in the sector of capital goods.
Real exports, despite monthly fluctuations, have been gaining upward momentum from developments in foreign exchange rates and a moderate recovery in the U.S. economy. In particular, those of motor vehicles and related goods as well as of capital goods and parts have recently been moving toward a pick-up.
Business fixed investment has been on a moderate increasing trend in a situation where corporate profits are at high levels and firms maintain a positive attitude toward such investment. Exports have been picking up on the whole, particularly in goods-- such as capital goods-- for the United States and the NIEs.
In this regard, the sluggishness in exports of capital goods and parts is strongly affected by the fact that sentiment in the manufacturing sector has deteriorated worldwide amid the current phase of global economic deceleration, causing firms to take a cautious stance toward business fixed investment.
In contrast to positive business fixed investment plans for fiscal 2015 reported by the Bank's Tankan(Short-Term Economic Survey of Enterprises in Japan), actual machinery orders and capital goods shipment have remained disappointing; some firms may postpone their fixed investment plans because of higher unexpected costs caused by labor shortages and rising prices of construction materials.
Business fixed investment has been picking up, as the aggregate supply of capital goods-- a coincident indicator of machinery investment-- has recently shown relatively high growth with improvement in corporate profits, and as machinery orders-- a leading indicator of machinery investment-- have been improving as a trend even in the manufacturing sector, albeit with fluctuations.
Exports have continued to show some weakness since the start of fiscal 2014, due partly to the sluggishness in emerging economies, particularly the ASEAN economies, which are closely linked to Japan's economy. However, they have recently shown signs of picking up on the whole, as seen in the fact that exports of capital goods to the United States have increased.
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