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No.47(2011/3/8)

The Economic and Labour Situation in Japan

Government announces GDP for October–December 2010
According to the government, Japan's real gross domestic product (GDP) contracted 1.1% in annualized, seasonally adjusted terms in the October–December 2010 quarter, slowing sharply from a revised 3.3% expansion in the previous quarter. The result marks the first contraction since a revised 1.9% decline in July–September 2009. In quarter-on-quarter terms, real GDP contracted 0.3%, compared with a revised 0.8% expansion in the July–September 2010 quarter.

Continued growth in the Asian economy as well as recovery in the United States are expected to help Japan's economy pick up in the first quarter of 2011.

Domestic demand contributed 0.2 percentage points to the rate of GDP contraction, after adding a revised 1.0 percentage points to GDP expansion in the previous quarter.

Consumer spending, which accounts for nearly 60% of Japan's GDP, was down 0.7% quarter-on-quarter, compared with a revised 0.9% rise in the previous quarter. The decline is due mainly to the diminishing effects of the government's fiscal stimulus measures.

Capital expenditure, which accounts for 16% of GDP, rose 0.9% quarter-on-quarter, slowing from a revised 1.5% gain in the previous quarter.

Private residential investment increased 3.0% quarter-on-quarter, higher than a revised 1.8% rise in the previous three-month period.

External demand, that is, exports minus imports, contributed 0.1 percentage points to the GDP contraction, after subtracting 0.1 percentage points from the GDP expansion in the previous quarter. Exports fell 0.7% quarter-on-quarter, due in part to the strong yen, after rising a revised 1.5% in the previous period. In early November, the dollar sank to 80.21 yen, its lowest level in 15 years and near the post–World War II record low of 79.75 yen.

Accordingly, Japan's real GDP for 2010 was 542.24 trillion yen, or $6.612 trillion, and the annual growth rate was 3.9%.

Industrial Production in January 2011
Industrial production in January 2011 increased 2.4% over the previous month, showing an increase for the third consecutive month; it was up 4.7% year-on-year. The index for January was 97.1 (seasonally adjusted). Industries that mainly contributed to the increase were as follows: (1) transport equipment, (2) general machinery, and (3) iron and steel, in that order. Commodities that mainly contributed to the increase were as follows: (1) large passenger cars, (2) semiconductor product machinery, and (3) drive transmission and control parts. According to the Survey of Production Forecast in Manufacturing, production was expected to increase 0.1% in February and 1.9% in March.

Living expenditures, savings, and liabilities decrease in 2009: National Survey of Family Income and Expenditure
Living expenditures dropped by 6.0% on a nominal basis in 2009. At the same time, liabilities decreased by 7.0% and savings by 2.2%. Families are also increasingly turning to discount stores and large-scale specialty stores for their shopping.
The results of the 2009 National Survey of Family Income and Expenditure were released on December 24, 2010, by the Statistics Bureau and the Director-General for Policy Planning of Japan. The results covered "family income and expenditure" and "savings and liabilities" for multi-person households. The survey has been conducted every five years since 1959 to grasp the overall state of household accounts.

(1) Living expenditures of multi-person households
Monthly living expenditures of multi-person households during the period from September through November 2009 (the "monthly average") were 300,936 yen per household. This was a decline of 6.0% on a nominal basis (at an annual rate of 1.2%) and a drop of 6.1% on a real basis adjusted for the change in consumer prices (at an annual rate of 1.3%).
In 1999, living expenditures per household started to drop for the first time since the survey began in 1959, and this trend has remained so ever since.

(2) Living expenditures by life stage
The life stages of workers' households are divided into five categories. The first stage refers to households comprising married couples (husband under 30); the second stage refers to households comprising married couples with two children (eldest child at preschool age); the third stage is households comprising married couples with two children (eldest child in junior high school); the fourth stage consists of households comprising married couples with two children (eldest child in university); and the fifth stage is made up of households of married couples (husband aged 60 or older). There are distinct differences in living expenditures among these stages, and they are especially striking in the areas of housing and education.
In the first stage, housing accounted for 19.8% of total living expenditures, which was much higher than in later stages due to the low ratio of home-ownership. In the later stages, housing expenditure drops as the percentage of home-ownership rises.
From the second stage, education accounts for an ever-increasing share of household spending. Spending on education reaches a peak of 27.7% in the fourth stage, when families are supporting children going to university. In the fifth stage, "reading and recreation" and "other living expenditures," including social expenses, account for the major part of family expenditure.

(3) Savings and liabilities
The amount of savings per multi-person household in 2009 was 15.21 million yen, or $185,487, down 2.2% from the 2004 survey. The amount of liabilities per multi-person household was 5.43 million yen, or $66,219, down 7.0% from the 2004 survey. Both of these figures registered the first decrease since the start of the survey. An analysis by age group shows that savings increase with age, reaching a maximum with households whose head is in his 60s. Households with heads over 70 have slightly lower saving rates because they spend their savings after retirement. Liabilities reach a maximum with households whose heads are in their 40s.

(4) Living expenditures by shop type
An analysis of where people purchase products shows that supermarkets accounted for the largest share with 36.0%. Compared with 1999, purchases at retail stores, department stores, and cooperative stores declined. On the other hand, discount stores and large-scale specialty stores showed a strong increase.

Labour Force Survey Monthly Results for January 2011
(1) Employment
The number of employed persons in January 2011 was 62.04 million, a decrease of 90,000, or 0.1%, from the previous year.

(2) Unemployment
The number of unemployed persons in January 2011 was 3.09 million, a decrease of 140,000, or 4.03%, from the previous year.
The seasonally adjusted unemployment rate was 4.9%.

According to a separate report released by the Ministry of Health, Labour and Welfare, job availability improved in January 2011, with the ratio of job offers to job seekers standing at 0.61, the same as in the previous month. This figure means that there were 61 jobs available for every 100 job seekers.

Consumer Prices
The January 2011 consumer price index in Japan was 99.0 (2005=100), down 0.3 points from the previous month and down 0.2% from the previous year.
These figures show that the Japanese economy has still not broken away from a state of deflation.
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