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Bank of Japan’s economic outlook

BOJ Governor Kuroda just released the latest report on the state of the Japanese economy. Here is an excerpt:

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Current Situation of Japan’s Economic Activity
Reflecting such improvement in the global economy, the economic growth in Japan has taken hold more firmly. While the Bank had previously assessed that the economy had “continued its moderate recovery trend,” the assessment was revised upward in the April 2017 Outlook Report, describing the economy as “having been turning toward a moderate expansion.” This is based on the fact that, with the virtuous cycle led by exports and production becoming firmer, the output gap — which shows the utilization of capital and labor and is defined such that its long-term average is 0 percent — has turned positive (Chart 3).

Let me elaborate on this point. In the corporate sector, exports and production have been on an increasing trend, mainly on the back of the cyclical improvement in the manufacturing sector on a global basis led by IT-related industries, as well as inventory and capital stock adjustments progressing in emerging economies (Chart 4). In this situation, corporate profits have been improving and the ratio of current profits to sales for all industries and enterprises for the October-December quarter of 2016 marked record profits (Chart 5). The March 2017 Tankan (Short-Term Economic Survey of Enterprises in Japan) suggested that business sentiment has improved in a wider range of industries. Under such circumstances, business fixed investment has been on a moderate increasing trend.
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The complete report can be found at: http://www.boj.or.jp/en/announcements/press/koen_2017/data/ko170510b1.pdf