Tankan Outline (September 2023)

Opinions on Economic and Financial Developments Economic Developments: • Japan's economy has recovered moderately and is likely to continue to do so. However, there remain extremely high uncertainties surrounding economic activity and prices. • Japan's economy has continued to recover moderately on the whole; although firms' business fixed investment has been somewhat weak due to subdued external demand, private consumption has continued on an expanding trend, albeit moderately. • The domestic economy has been resilient on the whole. Although production activity has been more or less flat since orders from overseas have been sluggish, sources such as data on the flow of people and financial results of retailers suggest that private consumption has been resilient. • It will be necessary to closely monitor developments in private consumption in particular because the materialization of pent-up demand to date has been limited. Developments in and levels of underlying inflation measures show a certain degree of possibility that the year-on-year rate of increase in the consumer price index (CPI) will continue to significantly exceed the price stability target for a considerable period of time, and that this will keep squeezing private consumption.  It seems that large firms, which have proceeded with structural reforms, have increased confidence in their earning power. Small and medium-sized fi tweet: <JPY=>:*ONE BOJ MEMBER: NEED TO CONTINUE WITH EASING PATIENTLY *BOJ: JAPANESE COS SEE 2.5% Y/Y INFLATION IN 1 YEAR ?*ONE MEMBER: NO NEED FOR ADDITIONAL YCC TWEAK WITH YIELDS STABLE *BOJ: JAPANESE COS SEE 2.1% Y/Y INFLATION IN 5 YEARS TIME tweet: ?*ONE MEMBER: END OF NEG. RATE, YCC MUST BE LINKED WITH CPI GOAL *ONE MEMBER: EASING WOULD CONTINUE EVEN WITH NEGATIVE RATE END *ONE MEMBER: ASSET BUYING MUST BE ALSO CONSIDERED WHEN EXITING tweet: BOJ SUMMARY: ONE MEMBER SAID THERE IS STILL SOME DISTANCE BUT JAPAN NEARING ACHIEVEMENT OF PRICE TARGET, SO LATTER HALF OF CURRENT FISCAL YEAR WILL BE CRUCIAL PHASE IN DETERMINING NEXT YEAR'S PRICE OUTLOOK, OTHER FACTORS

Business conditions across the Japanese manufacturing sector deteriorated at a stronger rate at the end of the third quarter of 2023. The latest data indicated weakness across the ...