the assessment of economic conditions as a whole …watches, continue to show brisk movements, and...

○ Production: In the automobile and automobile-related industries, production in Tohoku, Kanto, Tokai, Kinki, and Kyushu remains steady due to brisk sales of new model cars and mini cars reflecting a last-minute demand accompanying the consumption tax hike. In the general-purpose, production, and business oriented machinery industries, production remains steady especially in Hokuriku due to the effects of last minute demand accompanying the consumption tax hike. Production in the steel industry also remains steady in Kanto and Kinki due to brisk sales in the automobile-related sectors. Moreover, the electronic devices industry remains steady due to brisk production of devices for automobiles (Kyushu) and smartphones (Tokai). ○ Business investment: In manufacturing industries, business investment is centered on the maintenance and renewal of equipment nationwide, but there were some movements of investment for production capacity enhancement. In non-manufacturing industries, movements of opening new stores and remodeling existing stores have continued to be seen nationwide in the retail and services industries since the previous quarter. *Comment from a company - We built a new plant building to respond to an increase in demand for automobiles and smartphones. (Tohoku)

1. General Summary of Regional Economic and Industrial Research Results (from January to March 2014) (1/2) Reference 2

The assessment of economic conditions as a whole was unchanged, but picked up for the fifth consecutive quarter. It was revised upward in Hokuriku, Shikoku, and Kyushu, mainly due to the effects of last-minute demand accompanying the consumption tax hike and depreciation of the yen.

○ Employment situation: In manufacturing industries, a movement of responding to labor shortages with employment of non-regular employees has continued at transport equipment-related companies in Tokai, Kinki, Chugoku, and Shikoku. Moreover, some movements of hiring new employees and employment of regular employees can be seen centered on administrative departments. In non-manufacturing industries, a labor shortage continues to be seen in the retail and services industries on a nationwide basis. The construction industry also continues to see a labor shortage in Tohoku, Kanto, Tokai, and Okinawa in which public works, etc. are increasing. ○ Private consumption: At department stores, sales of luxury and other goods have continued to remain steady nationwide following the previous quarter. Moreover, sales of daily use items, white goods, and automobiles are brisk nationwide due to last-minute demand accompanying the consumption tax hike. As for travel, the number of tourists increased in Hokkaido and Okinawa, while the effects of heavy snow were seen in Kanto. Some respondents pointed out that the number of foreign tourists has increased in Hokkaido, Kinki, and Okinawa, partly due to the effects of the depreciation of the yen. * Comments on travel - Such effects as a decrease in the number of guests and closing of ski resorts were seen due to the heavy snow in February in Yamanashi and Tochigi Prefectures. (Kanto) - The number of tourists in February exceeded 500,000 for the first time due to the effects of low-cost carriers in service and the yen’s depreciation (the number of foreign tourists increased by 80.8% year-on-year). (Okinawa) * Comments on private consumption - The current orders received for houses decreased by 10-20% from the previous year partly due to a reactionary decline after the last-minute demand. (Hokkaido) - Movements of last-minute demand accompanying the consumption tax hike were seen in February and March, but a reactionary decline after the last-minute demand has been a major concern in and after April. (Tokai) - Private consumption is expected to be sluggish in the next quarter due to the effect of the consumption tax hike, but the effect is expected to be mitigated considerably from June, in which the bonus campaign starts. (Kyushu)

1. General Summary of Regional Economic and Industrial Research Results (from January to March 2014) (2/2)

Region General

economic conditions

Description of sector-specific conditions (major comments)

Hokkaido

Picking up moderately （→）

Comments from companies - Production of building materials is expected to remain at a high level until about July due to solid demand mainly for large projects, including hospitals and schools. (SME metal product manufacturer) - A movement to purchase high-priced items such as jewelry and luxury watches before the consumption tax hike has been seen, resulting in a rise in per-customer spending and an increase in sales as a whole. (Large retailer) - Seafood processing factories had trouble securing temporary workers. Under normal circumstances, workers flow from construction-related sectors after public works finish, but a labor shortage of construction-related sectors caused a decrease in the number of people coming to work for our company. (SME food manufacturer)

2. Summary of the Regional Economic and Industrial Research Results (Conditions by Region)

○ Production shows signs of picking up. (↑) In the transport equipment industry, production of motor vehicle parts for North America remains steady. Production in the ceramics, stone, and clay industry, including concrete products, and the metal products industry centered on building materials continues to be at a high level due to brisk construction demand. On the other hand, production in the electrical machinery industry, which was on an upward trend, has decreased after passing a production peak of information and communication equipment.

○ Business investment shows signs of picking up. (→) In manufacturing industries, business investment is centered on the maintenance and renewal of equipment, but there are movements of new business investment, as well as investment for streamlining and enhancement of equipment. In non-manufacturing industries, there are movements including remodeling of supermarkets and active opening of new convenience stores and drug stores in the retail industry.

○ Employment is moderately improving. (→) In manufacturing industries some companies face labor shortages with difficulties securing personnel, and they handle the shortages by hiring temporary employees. In non-manufacturing industries, a movement of increased hires reflecting openings of new stores is spreading among the retail industry. The effective ratio of job offers to applicants has improved over the long term, though it is at a lower level compared with the national ratio.

○ Private consumption is picking up. (→) Sales are increasing in the retail industry as a whole, reflecting last-minute demand accompanying the consumption tax hike. At department stores, sales of luxury goods are significantly increasing, and at supermarkets, a movement of bulk buying can be seen centered on processed food and daily expendables. As for sales of home appliances, sales of white goods and PCs are increasing, and sales of new cars continue to be brisk, centered on new car models. As for travel, the number of tourists to Hokkaido remains brisk, exceeding that of the same month the previous year for the 24th consecutive month and including an increase in the number of foreign tourists visiting winter events such as the Sapporo Snow Festival.

Region General

economic conditions


Tohoku

Improving moderately （→）

Comments from companies - Sales of products for overseas and other products are brisk. On the other hand, purchase costs of raw materials are rising. We are aiming to secure earnings by improving efficiency and reducing expenses. (Large manufacturer/Miyagi Prefecture) - Although orders received are increasing moderately, we are faced with a situation in which the rise in market prices of raw materials, the yen’s depreciation, and electricity rate hikes are putting pressure on profit. (SME manufacturer/Yamagata Prefecture) - We continue to increase sales due to opening new stores, but our ordinary profit slightly declined due to an increase in personnel costs, merchandising expenses, and other expenses. It is uncertain what effects will be seen after the consumption tax hike. (Large retailer/Fukushima Prefecture)

○ Production is picking up. (↑) Production in the general machinery industry is increasing with brisk demand for automobiles and overseas. The electronic parts and devices industry is picking up with brisk demand for in-car products. The transport equipment industry remains at a high level due to last-minute demand accompanying the consumption tax hike. The utilization of plants for the ceramic, stone, and clay products continues to be at a high level due to recovery and reconstruction work following the Great East Japan Earthquake. Production of housing building materials among metal products is increasing due to last-minute demand accompanying the consumption tax hike.

○ Business investment shows moderate signs of picking up. (→) In the manufacturing industries, there is a large amount of positive investment for production capacity enhancement and investment in research and development, in addition to investment regarding maintenance and renewal, but this has not led to boosting the whole business investment plan. In non-manufacturing industries, although business investment is centered on the maintenance, renewal, and streamlining of equipment, the trend of investment in new store openings with the aim of securing market share and maintaining earnings amid fiercer competition among retailers continues to stand out. Some manufacturers plan to increase investment for new products and production and large-scale investment to expand into new businesses in FY2014.

○ The employment situation continues to improve. (→) Job offers in the manufacturing industries that receive orders recovered, have increased, and many related-job offers for temporary employees also continue to be seen. There is a sense of an insufficient number of salespersons in the retail industry, engineers to conduct site management in the construction industry, etc. In coastal areas in disaster-affected prefectures, although the ratio of job offers to applicants continues to be high, a mismatch continues between the needs of those offering jobs and those of job seekers in the manufacturing industries, including seafood processing, the wholesale and retail industries, and the construction industry, including civil engineering work.

○ Private consumption continues to remain steady. (→) At department stores, sales of luxury goods, such as luxury watches, continue to show brisk movements, and sales of cosmetics, overseas brands, etc. are brisk due to last-minute demand accompanying the consumption tax hike. However, sales of spring clothing, etc. were sluggish partly due to the weather. At supermarkets, bulk buying of long-life frozen foods and daily necessities including seasonings and detergents can be seen due to last-minute demand accompanying the consumption tax hike. Sales of home appliances largely exceed those in the previous year centered around white goods and PCs, mainly due to replacement by purchases accompanying consumption tax hike. The number of sales of new cars also remains at significantly higher level than that in the previous year due to increased demand accompanying the consumption tax hike and the effect of introducing new car models.

Region General

economic conditions


Kanto

Picking up

（→）

Comments from companies - Demand for construction and civil engineering is turning toward an increase. In addition to steady base demand, production remains brisk due to last-minute demand in anticipation of the consumption tax hike. (Large manufacturer/Tokyo) - Although we received more orders than we can keep up with in terms of production, we suspended production because parts were not delivered due to interruptions at our client’s plants caused by the heavy snow in February. (Large manufacturer/Shizuoka Prefecture) - We are uncertain about the possibility of hiring good human resources because large companies altogether increase the number or new hires. We especially struggle to hire people with experience. (SME information service business/Tokyo)

○ Production shows signs of picking up. (→) Production remains brisk in a wide range of industries, including the transport equipment, general machinery, and electrical machinery industries, mainly due to recovery of the domestic economy and last-minute demand accompanying the consumption tax hike. In addition, in the steel and chemicals industries, demand of automobile and construction sectors remains brisk. There are concerns about a reactionary decline after the consumption tax hike in the future.

○ Business investment shows signs of picking up. (→) Investment in manufacturing industries continues to be centered on maintenance, renewal, and streamlining. In the transport equipment and other industries, which show steady demand, there are movements of making investment for capacity enhancement of production equipment ahead of schedule, as well as steady movements of overseas investment. In non-manufacturing industries, there are steady movements of remodeling stores, etc. and opening new stores mainly in the retail industry. Especially among convenience stores, investment in new store openings in Japan as well as various regions in Asia has continued. On the other hand, some manufacturers postpone investment reflecting poor business performance.

○ The employment situation is recovering moderately. (→) In manufacturing industries, there are movements of increasing the number of employees reflecting an increase in production, etc. However, there are also movements of curbing an increase in the number of employees as a whole by adjusting for excesses and shortages between departments such as manufacturing and product development. In non-manufacturing industries, there is a sense of an insufficient number of engineers at construction sites, salespersons at stores in the retail industry, etc. There is a shortage of applicants for any recruitment; therefore, some companies have trouble securing human resources. Moreover, there is a sense of an insufficient proportion of young regular employees in many industries.

○ Private consumption is picking up. (→) Private consumption is moderately picking up. At department stores, sales remain brisk centered on luxury goods. Automobile sales also continue to be brisk centered on mini and compact cars. At convenience stores, sales of coffee, boxed meals, etc. are brisk. In addition, at home appliance retailers, sales of relatively high-priced products are brisk. On the other hand, domestic trips have been seriously affected by heavy snow. As for daily necessities and eating out, low-end and budget-minded attitudes still persist, although there are some hopeful signs.

Region General

economic conditions


Chubu (Tokai)

Improving moderately

（→）

Comments from companies - Production of motor vehicle parts for domestic automobile assemblies is increasing due to the effects of last-minute demand accompanying the consumption tax hike and introducing new car models. Although we expect that the effect of new car models will continue after April, we are concerned that the production as a whole will decrease and the entire situation will remain severe. (Large motor vehicle parts manufacturer/Aichi Prefecture) - Localization of production is advancing, and production at overseas plants is increasing. Even if the appreciation of the yen is corrected, we will not return to domestic production. We face a challenge in terms of how to return profits gained overseas to Japan. (SME motor vehicle parts manufacturer/Aichi Prefecture) - Movements of last-minute demand accompanying the consumption tax hike began in earnest in January. Sales of luxury goods, which have been brisk, are further increasing. (Large department store/Aichi Prefecture)

○ Production shows signs of increasing. (↑) In the core automobile-related industries, in addition to remaining steady demand in North America and China, there are movements of increasing domestic demand. Production in the electronic parts and devices industry remains at a high level mainly for smartphones. In addition, movements of an increase in last-minute demand accompanying the consumption tax hike can be seen in such industries as the automobile-, housing- and production machinery-related industries, while there are many concerns about effects of a reactionary decline after April. Some small- and medium-sized enterprises see an increase in production centered on automobile-related demand, while some are facing a decline in profits, reflecting soaring raw material costs, and a rise in fuel costs and electricity rate.

○ Business investment increased moderately. (→) In manufacturing industries, investment for production capacity enhancement in North America and Asia is observed, while domestic investment centers on investment for maintenance, renewal, and streamlining. In non-manufacturing industries, there are movements of remodeling stores and opening new stores in the retail industry, such as department stores and supermarkets.

○ The employment situation is improving. (→) In manufacturing industries, some companies in the automobile-related industries are dealing with production increases by expanding overtime work and hiring seasonal workers. In non-manufacturing industries, a sense of an insufficient number of non-regular employees has increased in the retail industry, including supermarkets, and the situation has continued in which the number of applicants is insufficient to meet the number of offers. Although public works projects remain almost flat, some respondents pointed out that a labor shortage and soaring labor charges continue.

○ Private consumption is moderately picking up. (→) At department stores, in addition to brisk sales of luxury goods and thriving events, there are movements of last-minute demand accompanying the consumption tax hike. Although sales at supermarkets exceeded those in the previous year due to a rise in market prices of fresh foods and sales promotion effects, as well as movements of last-minute demand accompanying the consumption tax hike, the low-end attitude of customers continues to be seen, intensifying competition between businesses handling similar products. Automobile sales remain at a higher level than those in the previous year with movements of last-minute demand accompanying the consumption tax hike, in addition to brisk sales of mini cars. Sales of houses are in a weak phase, since movements of last-minute demand accompanying the consumption tax hike have settled.

Region General

economic conditions


Chubu (Hokuriku)

Improving moderately

（↑）

Comments from companies - Sales and profits of machine tools exceed those of the same quarter in the previous year mainly due to brisk demand for aircraft and medical devices in North America, as well as the domestic factors including last-minute demand accompanying the consumption tax hike and economic policy effects. (SME general-purpose, production, and business oriented machinery manufacturer/Toyama Prefecture) - We will launch sales and discount privileges after April, but we will not avoid a reactionary decline after last-minute demand accompanying consumption tax hike, and are uncertain about the future. (Large retailer and wholesaler/Ishikawa Prefecture) - We are in the process of planning for a basic wage raise for the first time in six years. (Large general-purpose, production, and business oriented machinery manufacturer/Toyama Prefecture)

○ Production is increasing. (→) Production in the chemical industry continues to be brisk centered on generic drugs. The general-purpose, production, and business oriented machinery industries are increasing, partly due to last-minute demand accompanying the consumption tax hike and economic policy effects in Japan, in addition to brisk overseas demand. Production in the electronic parts and devices industry remains at a high level with steady demand for smartphones, tablet PCs and automobiles. In the metal products industry, production of aluminum building materials (for housing and exteriors) is recovering mainly due to last-minute demand accompanying the consumption tax hike. In the textiles industry, demand from automobile and medical uses is steady, but demand for domestic sports and standard clothing is on a downward trend.

○ Business investment is improving. (→) In manufacturing industries, in addition to domestic investment for enhancing equipment in response to R&D for new products and production increases, overseas investment for setting up and adding plants where there is demand continues to increase. In non-manufacturing industries, investment is mainly for renewal of aging equipment and energy-saving investment, and construction of new stores can be seen in some sectors. Some companies are making investments to take advantage of new demand accompanying the opening of the Hokuriku Shinkansen.

○ The employment situation is moderately improving. (↑) In manufacturing industries, some companies are handling labor shortages by increasing overtime hours, shifting regular employees from other departments, and increasing non-regular employees. In addition, some companies shift employees from non-regular employees to regular employees. Non-manufacturing industries face a chronic labor shortage, because of the obvious tendency of job seekers to flow into jobs with better working conditions. As for salaries, some companies are providing a basic salary increase.

○ Private consumption is increasing. (↑) At department stores, last-minute demand accompanying the consumption tax hike can be seen centered on luxury goods. Automobile sales are brisk for new car models. Sales of home appliances are brisk for large-size refrigerators and high-end air conditioners, reflecting last-minute demand accompanying the consumption tax hike, as well as showing replacement demand by purchases accompanying the termination of Windows XP support for PCs. Consumer attitudes also exhibit increased sophistication, being selective for both pricing and quality while increasingly taking advantage of membership cards and points. .

Region General

economic conditions


Kinki

Picking up steadily （→）

Comments from companies - We expect that a reactionary decline after the consumption tax hike will be smaller than previously expected due to possible last-minute demand accompanying the light vehicle tax hike in April 2015. However, we anticipate that the situation will deteriorate considerably after the light vehicle tax hike. (Large transport equipment manufacturer/Osaka Prefecture) - We plan to make investment on the same scale as this quarter in the next quarter. We will make investment mainly for logistic facilities due to the expansion of e-commerce markets and increasing needs for advanced logistic facilities. (Large general constructor/Osaka Prefecture) - We will utilize the investment promotion tax system for productivity enhancement, with which we can amortize costs promptly. (SME transport equipment manufacturer/Hyogo Prefecture)

○ Production shows signs of picking up. (↑) Production of solar cells remains brisk. Production of automobiles, building materials, white goods, and small construction machinery is brisk mainly due to last-minute demand accompanying the consumption tax hike. The electronic parts industry, including liquid crystal and semiconductors, is flat due to the changeover period for overseas demand. Production of semiconductor manufacturing equipment is steady. The production equipment-related sectors show signs of picking up with a recovery trend for domestic demand.

○ Business investment is moderately picking up. (→) In manufacturing industries, trends of investment for upgrading old facilities and investment for new product development in Japan are mainly seen in the automobile-related industries. Especially in small- and medium-sized manufacturers, maintenance and renewal of production equipment, maintenance and repair of facilities, and energy saving and new energy efforts stand out as the causes of improvements to productivity. In non-manufacturing industries, there is a willingness to invest in establishing logistic facilities, opening new stores, remodeling stores, etc. to improve logistic efficiency, and secure sales. As for overseas, many companies plan to invest in capacity enhancement under the concepts of local production for local consumption and increasing local procurement.

○ The employment situation is picking up. (↑) In industries including automobiles, housing, and nonferrous metal, in which the business conditions have been improving, movements of increased hiring of regular employees and part-timers, and balancing excesses and shortages between departments continue. Some companies look for human resources for overseas business development. Although there are movements of an increase in hiring new employees in accordance with economic recovery, some respondents pointed out that human resources flow into large companies, and the number of applicants is insufficient to meet the number of offers. Moreover, movements of hiring mid-career employees of fully-qualified personnel and industry-ready engineers continue to be seen.

○ Private consumption is picking up. (→) Last-minute demand accompanying the consumption tax hike can be widely seen in the retail industry as a whole from daily necessities to luxury goods at a relatively early date. At department stores, sales of luxury goods continue to remain brisk due to the financial asset effects driven by rising stock prices and improvement of income environment. Automobile sales including mini cars are at a high level. Sales of home appliances are steady for white goods, etc. Effects of foreign tourists mainly from Southeast Asia have increased the consumption of luxury goods, accommodation, etc. It is uncertain what effects will be seen after the consumption tax hike, with a variety of opinions among companies.

Region General

economic conditions


Chugoku

Picking up

（→）

Comments from companies - Understanding the need to secure the highest quality personnel, and taking into account both the societal demand for wage increases and business conditions of our company in a comprehensive manner, we provided an annual pay increase and a basic wage raise. We will also raise bonuses. (Large manufacturer/Hiroshima Prefecture) - Wage raises are linked to business results, so it will be difficult until profits finally increase. (SME manufacturer/Hiroshima Prefecture) - We expect that a reactionary decline after the consumption tax hike will pass in September at the latest. We think that trends related to the new consumption tax rate of 10% will be revealed after that. (Large manufacturer/Hiroshima Prefecture) - As for the effects of last-minute demand accompanying the consumption tax hike, we initially predicted that a reactionary decline would be seen from April to June, but now we anticipate that a reactionary decline will last longer than the initial prospect because last-minute demand was more brisk than we expected. (Large retailer/Hiroshima Prefecture)

○ Production is picking up. (↑) Production in the steel industry is high since domestic demand continues to remain brisk. Production in the chemical industry has slightly increased with improved market conditions of some items, in addition to securing inventory before periodic plant repairs. Production in the general-purpose, production, and business oriented machinery industries has slightly increased, accompanying steady demand for corporations as well as last-minute demand before the consumption tax hike in some sectors. Production in the automobile industry has slightly decreased due to effects of some types of cars discontinuing production or starting production overseas despite continuous high-level production. Production in the electronic parts and devices industry has slightly decreased due to the changeover period of new product releases.

○ Business investment shows signs of picking up. (→) In manufacturing industries, investment for capacity enhancement, maintenance and renewal utilizing government support, etc. is promoted. Especially in automobile-related industries, there are positive movements toward an increase in orders received and in response to new products in Japan, as well as the development of overseas bases. In non-manufacturing industries, new store openings in the retail industry have been promoted at a significantly larger scale than the previous year.

○ The employment situation is picking up, spreading a sense of labor shortage in a wide range of industries centered on engineers and sales personnel. (→) There is a shortage of employees in production and technical fields due to an increase in production and orders received in the manufacturing and construction industries, and there is also a shortage of employees in the sales field associated with the opening of new stores in the retail industry. Some respondents point out that a wide range of industries are experiencing a labor shortage.

○ Private consumption is picking up and last-minute demand due to the consumption tax hike can be seen. (→) At department stores, sales of luxury goods continue to remain brisk. At supermarkets, although some products including fresh vegetables sell well, sales of clothing as a whole grow at a sluggish pace. Last-minute demand accompanying the consumption tax hike brought about good sales of cosmetics, renovation goods, home appliances, and others. In addition, sales of automobiles are brisk, partly due to the effects of introducing new car models.

Region General

economic conditions


Shikoku

Picking up （↑）

Comments from companies - Global supply-demand balance of chemical resin has no chance of improvement over the next few years, plunging into price competition. Some companies face a situation of transferring production licenses to Chinese companies. There is an urgent need to build a framework that can withstand the price competition caused by further cost reduction. (Large manufacturer/Ehime Prefecture) - Although we need to increase our production capacity to deal with increasing volume of orders and secure human resources, we are competing with other industries for personnel due to a shortage of human resources due to earthquake reconstruction and Olympics-related demand. We will increase the number of employees by requesting cooperative companies to secure human resources. (Large manufacturer/Kagawa Prefecture)

○ Production shows signs of picking up. (↑) In the food, ceramics, stone and clay, and general-purpose and production machinery industries, production remains at a high level. Production shows signs of picking up, due to business recovery of large customers (automobiles, housing building materials, etc.) in the steel industry, and due to improvement in winning orders in the transport equipment (shipbuilding) industry. As for prospects, a temporary decline is expected to occur due to reaction of last-minute demand accompanying the consumption tax hike.

○ Business investment shows some signs of picking up. (→) In manufacturing industries, enhancing production equipment with an eye toward a production increase and new orders received, as well as research and development, etc. are being planned and conducted in industries including the food, nonferrous metal, general-purpose and production machinery, and transport equipment (shipbuilding) industries. In non-manufacturing industries, in addition to opening new stores, enhancing equipment, etc., the setting up of mega solar power plants is being planned and conducted.

○ The employment situation is improving. (↑) A wide range of industries, including the electrical machinery, transport equipment (shipbuilding), retail, services, and electric work industries indicate that they have an insufficient or a slightly insufficient number of employees; therefore, the sense of a labor shortage has been increasing from the previous survey. As for future movement, many industries and companies intend to increase the number of employees, showing enhanced willingness of companies to hire employees. On the other hand, there are few companies intending to reduce the number of employees.

○ Private consumption is picking up with some last-minute demand accompanying the consumption tax hike. (↑) Last-minute demand accompanying the consumption tax hike is evident in automobile sales, as well as sales centered on luxury goods, processed food and miscellaneous daily goods, and cigarettes at department stores, supermarkets, and convenience stores, respectively, and sales of home appliances mainly of air conditioners and refrigerators. Service consumption (travel) continues to remain brisk for domestic trips, although overseas trips for China and the Republic of Korea are sluggish.

Region General

economic conditions


Kyushu

Picking up

（↑）

Comments from companies - In addition to demand growth accompanying improvement of consumer confidence, last-minute demand accompanying the consumption tax hike leads to a significant increase in our production. (Large manufacturer/Fukuoka Prefecture) - We have a policy to do everything possible to refrain from making business investment before our earnings are recovered, but we may increase investment in the second half if we make a profit in the first half. (SME manufacturer/Oita Prefecture) - Since large companies altogether anticipate wage improvement, we expect that the effects of reactionary decline will fade away by the time the bonus campaign starts (Large retailer/Fukuoka Prefecture) - In order to secure human resources, we are making an effort to maintain the current level of wages for employees even at the reduction of executive compensation. (SME accommodation services business/Oita Prefecture)

○ Production is picking up. (↑) The core automobile industry is showing brisk activity due mainly to last-minute demand accompanying the consumption tax hike and the effect of introducing new car models. Moreover, last-minute demand for automobiles, home appliances, and housing-related industries affects basic materials-related industries, including steel, chemicals, and paper industries. The production machinery and electrical machinery industries mainly for semiconductors and automobiles continue to be active, with vigorous business investment in China, emerging countries, and other countries, despite little domestic demand. In the electronic parts and devices industry, although demand for smartphones, audio-visual equipment-related products etc. is sluggish, automobile demand remains brisk due to last-minute demand.

○ Business investment shows signs of picking up. (→) In manufacturing industries, in addition to showing movements of high-level investment toward capacity enhancement and productivity improvement, a positive attitude also can be seen, including the possibility of an increase in investment in the second half depending on earnings in the first half. On the other hand, some respondents limit business investment to secure earnings in preparation for environmental changes in accordance with fiercer global competition. In non-manufacturing industries, there are large-scale plans in construction-related investment, as well as remodeling stores to curb reactionary decline after the consumption tax hike and movements of reducing logistical costs and by energy saving.

○ The employment situation is picking up. (↑) Demand for temporary employees for manufacturing industries increased in response to last-minute demand accompanying the consumption tax hike, and some respondents pointed out that they have a slightly insufficient number of regular employees as well. There are movements of raising wages for employees under the continuous shortage of human resources with expertise in construction, electricity, etc., while some respondents are trying to maintain the status quo amid these severe business conditions.

○ Private consumption is picking up. (↑) Last-minute demand accompanying the consumption tax hike is high in luxury goods, automobiles, large home appliances, etc., and bulk buying of daily necessities and consumables also can be seen. As for condominium sales, sales prices are increasing due to soaring personnel costs and construction materials, but movements of making a sale with a good location can be seen due to improvement of consumer confidence. Both domestic and inbound travel remains brisk. As for leisure-related sectors, some respondents pointed out that the consumption tax hike has no significant impact. On the other hand, there are concerns about stagnation in consumption accompanying the consumption tax hike in the next quarter, but there are also some positive opinions that the stagnation will be temporary, mainly due to movement towards raising wages.

Region General

economic conditions


Okinawa

Improving

（→）

Comments from companies - Related to the yen’s depreciation, purchase prices of raw materials, including malt and hops, and other materials are increasing, bringing about negative effects. (Food) - Sales increased due to last-minute demand accompanying the consumption tax hike. Sales of daily necessities, drinking water, health foods, cosmetics, and white goods are remarkably good. (Supermarket) - Tourist business from overseas remains brisk mainly due to expansion of airline routes and the Chinese New Year’s holiday. In addition, favorable effects of the opening of New Ishigaki Airport seem to be continuing. (Travel agency) - We are concerned about the consumption tax hike, although we expect that there will be no significant impact on sales. We will achieve sales targets by planning various events. (Department stores)

○ Production has been flat. (→) Profits of some companies in the metal product industry, including aluminum, have declined, reflecting a rise in unit costs of materials imported from overseas caused by the yen’s depreciation without passing it on in prices. In the food industry, profits have declined due to soaring raw material costs including flour. On the other hand, the ceramics, stone, and clay industry continues to show signs of picking up, supported by an increase in public investment and private demand.

○ Business investment has been flat. (→) In manufacturing industries, investment is centered on the maintenance and renewal of equipment. In non-manufacturing industries, the services, transport, and retail industries remain steady, showing movement toward enhancing equipment and opening new stores.

○ The employment situation shows signs of improvement. (↑) Although it remains in a severe situation compared with the national ratio, the effective ratio of job offers to applicants continues to show an improvement trend, remaining at the highest level since the reversion to Japan (in 1972). While the majority of companies indicate that they have an appropriate number of employees, there is a sense of an insufficient number of overall employees in the travel industry, non-regular employees in the wholesale and retail industries, and human resources with skills in the information and communication and construction industries.

○ Private consumption shows signs of improvement. (↑) At department stores and supermarkets, the number of customers, per-customer spending, and the number of items purchased have continued to be on an upward trend following the previous quarter, and sales of white goods and daily necessities such as paper remain steady especially due to last-minute demand accompanying the consumption tax hike. Likewise, cargo volume is increasing in the transport industry. As for travel, the number of tourists remains steady, due mainly to the increased attractiveness of Okinawa caused by the yen’s depreciation and seasonal factors, including training camps for professional baseball teams and the Chinese New Year’s holiday, in addition to the effects of attracting customers due to the expansion of low-cost carrier routes and the opening of New Ishigaki Airport. As for the number of tourists from overseas, in addition to an increase in the number of tourists from Taiwan, Hong Kong, the Republic of Korea, etc., the number of tourists from China has recovered to the level of the year before last. Thus, the number of tourists as a whole remains steady, exceeding the level of the same month in the previous year for the 17th consecutive month since October 2012, marking the first time that 500,000 tourists visited in the month of February (up 11.2% year-on-year).

the assessment of economic conditions as a whole …watches, continue to show brisk movements, and...

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