In fiscal 2019, although the growth pace is projected to decelerate, the economy is expected to continue expanding, underpinned by the increase in exports on the back of the growth in overseas economies, and the median of the forecasts of the real GDP growth rate is 0.7 percent.
The Japanese economy is expected to return to a moderate recovery path from the latter half of this fiscal year as production regains traction with further easing of supply-side constraints, backed by an increase in exports reflecting the recovery in overseas economies and by a rise in rebuilding demand.
Going forward, against the backdrop of a moderate recovery trend in the economy, an increase in exports, and the decline in crude oil prices, corporate profits are likely to continue improving and business fixed investment is projected to continue on a moderate increasing trend.
Many members referred to the fact that the increase in exports was leading to an increase in production as a feature of recent developments in economic indicators. They presented a positive assessment that a virtuous cycle had started to operate.
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.
Corporate profits have been high despite the surge in prices of raw materials such as crude oil. Large manufacturing firms in particular have made successive upward revisions to their profit estimates due to the increase in exports coupled with the depreciation of the yen.
The economic growth rate was pushed up principally because the contribution of external demand to GDP rose due mainly to the increase in exports. These developments were mostly in line with the Government's view of the economic situation.
During the past two years, a moderate economic recovery has been supported by the following mechanism. Growth in exports and demand for information technology(IT) has led recovery in production as well as profits, which in turn induced increase in business investment.
The movement toward greater free trade over the past five decades has conferred significant economic benefits on Israel: the opening of new markets, improved conditions for Israeli businesses operating abroad, increased exports, and increasingly robust platforms for resolving trade disputes and enhancing cooperation.
The strong domestic demand in China has stimulated economic activity in other countries in the region such as the NIEs and the ASEAN countries through increased exports to China. As a result, these economies continue to show high growth supported by a virtuous circle of growth in production, income, and spending.
However, in the manufacturing sector, there is a sense that capital stock is still insufficient, mainly due to the increase in exports, and it is likely that the expansion in global IT-related demand underlying this increase in exports will continue to last for a long time.
With supply-side constraints easing further and production regaining traction, Japan's economy is expected to return to a moderate recovery path from the second half of fiscal 2011, backed by an increase in exports reflecting the improvement in overseas economic conditions and by a rise in demand for rebuilding.
Emerging economies other than China and commodity-exporting economies have been recovering moderately on the whole, mainly reflecting an increase in exports and the effects of economic stimulus measures. Going forward, as domestic demand has remained firm, those economies are likely to continue their moderate recovery, partly supported by trading with advanced economies.
Other emerging economies and commodity-exporting economies have picked up on the whole, particularly reflecting an increase in exports, the past bottoming out of commodity prices, and the effects of economic stimulus measures in those economies. The growth rates of these economies are likely to increase gradually, due mainly to the spread of the effects of steady growth in advanced economies.
The member remarked that the decline in product prices attributable to a deterioration in the supply and demand balance in the short run had stopped, reflecting the completion of inventory adjustment and the increase in exports. The member added that, however, it was still difficult for firms to raise product prices given the persistently weak domestic private demand.
However, as supply-side constraints ease and production regains traction, the economy is expected to return to the moderate recovery path from the second half of fiscal 2011, backed by an increase in exports reflecting the high growth of the global economy and by a rise in demand for restoring capital stock.
Emerging economies other than China and commodity-exporting economies as a whole have been recovering moderately, due mainly to an increase in exports and the effects of economic stimulus measures. Growth rates are likely to increase gradually, due mainly to economic stimulus measures and the spread of the effects of steady growth in advanced economies.
European economies as a whole have been recovering moderately, albeit with some differences in growth by country. While peripheral countries in the euro area are registering low growth, large core economies, such as Germany and France, are enjoying steady growth supported by increases in exports, particularly to the emerging economies, and private consumption.
Since the pace of increase in exports exceeded that in imports, the real trade balance(real exports minus real imports), increased substantially from the previous quarter by 15.8 percent in the July-September quarter, and the contribution of external demand to the real GDP growth rate was as high as 1.6 percentage points on an annualized basis.
Emerging economies other than China and commodity-exporting economies as a whole have been recovering moderately, due mainly to the increase in exports and the effects of the economic stimulus measures of these economies. Their growth rates are likely to increase gradually, due mainly to the effects of the economic stimulus measures and the spread of the effects of steady growth in advanced economies.
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