analysis of all industrial actities the second quarter of 2014 summary

The Second of 2014 Analysis of All Industrial Activities

Summary Contents

August 28, 2014 Research and Statistics Department,

Minister’s Secretariat, Ministry of Economy, Trade and Industry

[Topics] ・Reaction After Increase in Consumption Tax Rate ・Changes in the Indices of Production Capacity of Japan’s Manufacturing Industry 1. Trends of All Industrial Activities (1) Outline of all industrial activities (2) Outline of industrial activities 1) Production trends 2) Production trends by item 3) Shipment trends 4) Inventory trends (3) Outline of tertiary industry activities 1) Trends by type of business 2) Trends of broad-ranging personal services and broad-ranging business services

2. Supply Trends for Final Demand (1) Outline of supply trends for final demand 1) Supply trends of all industries 2) Supply trends for consumption 3) Supply trends for investment (2) Outline of exports and imports 1) Export trends 2) Import trends

Reaction After Increase in Consumption Tax Rate

~ Looking at the mining and manufacturing industry as a whole, compared to the phase after the increase in consumption tax rate in 1997, in this current phase, a momentum where production and shipments are becoming weaker, and inventory expanding is becoming stronger ~

【Analysis Point 1】

Comparison of Industrial Production Index with Previous Increase in Consumption Tax (April 1997, April 2014 = 100, seasonally adjusted)

~ Although the inventory level after an increase in consumption tax rate is higher in 1997, the inventory rate index (ratio of inventory in relation to shipment) is higher in this current phase ~


Comparison of Inventory Index and Inventory Rate Index with Previous Increase in Consumption Tax (2010 = 100, seasonally adjusted)

Source: Created based on “Indices of Industrial Production”

Source: Created based on “Indices of Industrial Production.”

85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Mining and manufacturing: Shipment

Current (Consumption tax increase in April 2014)

Previous (Consumption tax increase in April 1997)

85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Mining and manufacturing: Production



85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Mining and manufacturing: Inventory



85 90 95

100 105 110 115 120 125 130 135 140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Mining and production: Inventory



85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Mining and production: Inventory rate



1

• In 1997, during the third quarter of 1997 about six months after the increase in consumption tax rate, there was a shift from “inventory accumulation stage” to “expanding inventory stage.”

• This time, as of the first quarter of 2014, there was a shift from “inventory accumulation stage” to “expanding inventory stage.”

• It is thought that the state is one in which the momentum of shipments is weak and it is difficult to decrease inventory.

~ When looking at the inventory cycle graph, inventory changed to “expanding inventory stage” in the first quarter of 2014 ~ 【Characteristics】


Source: Created based on “Indices of Industrial Production”

【Analysis Point 4】 ~ The weakness of exports is a factor behind the weak moment of shipment in this current phase ~ 【Characteristic】 • When looking at changes in the contribution ratio of shipments for domestic use and shipments for exports

in relation to the growth rate of shipments, shipments for exports contributed in a positive way through the period before and after the increase in consumption tax in 1997. However, after the fourth quarter of 2014, shipments for exports are contributing in a negative manner.

Factorial Analysis of Shipment Index (for domestic use, for exports) Comparison With Previous Increase in Consumption Tax Rate

(2010 = 100, seasonally adjusted)

Source: Created based on “The Indices of Industrial Domestic Shipments and Exports.”

Comparison of Inventory Cycle Graph with Previous Increase in Consumption Tax Rage (2010 = 100)

Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ

1996 1997 1998 1999 2000

- 8

- 6

- 4

- 2

0

2

4

6

Shipments for exports

Shipments for domestic use

Shipments

(Compared to previous quarter, %, % points)Previous

(Q/year)

ⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣⅠⅡⅢⅣ

2013 2014 2015 2016 2017

- 8

- 6

- 4

- 2

0

2

4

6

Shipments for exports

Shipments for domestic use

Shipments

(Compared to previous quarter, %, % points)Current

(Q/year)

-10

-5

0

5

10

-10 -5 0 5 10

(%) c

hang

e in

inve

ntor

y fr

om th

e en

d of

the

sam

e qu

arte

r of t

he p

revi

ous

year

% Change in production from the same quarter of the previous year

1997Ⅱ

1996Ⅰ

Inve

ntor

y ad

just

men

t sta

ge

Inve

ntor

yac

cum

ulat

ion

stag

e

Unintended decreasing stage of inventory

Expanding inventory stage

Previous

1998Ⅰ

1997 Ⅳ

1997Ⅰ

1997Ⅲ

1998Ⅱ

1998Ⅲ

1998 Ⅳ

-15

-10

-5

0

5

10

15

-15 -10 -5 0 5 10 15

(%) c

hang

e in

inve

ntor

y fr

om th

e en

d of

the

sam

e qu

arte

r of t

he p

revi

ous

year

% Change in production from the same quarter of the previous year

2014Ⅱ

Inve

ntor

y ad

just

men

t sta

ge

Inve

ntor

yac

cum

ulat

ion

stag

e



Current

2013Ⅰ 2013Ⅱ 2013Ⅲ 2013Ⅳ

2014Ⅰ

Increase in consumption tax rate Increase in consumption tax rate

2

• Compared to the phase after the increase in consumption tax rate in 1997, the current phase is characterized by a large decrease in shipment of durable consumer goods, and a large increase in inventory.

• Compared to 1997, in 2014, non-durable consumer goods are also demonstrating a larger width of increase in production and shipment before the rise in consumption tax and a larger width of decrease at the time of rise in consumption tax (April).


Source: Created based on “The Indices of Industrial Production.”

【Characteristics】

~ In this current phase, shipment of durable consumer goods decreased greatly, and inventory increased significantly ~

Comparison of Consumer Good Index with Previous Increase in Consumption Tax Rate (April 1997, April 2014 = 100, seasonally adjusted)

85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Consumer goods: Production



85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Consumer goods: Shipment



85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Consumer goods: Inventory



85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Durable consumer goods: Production

Current (Consumption tax increase in April 2014)Previous (Consumption tax increase in April 1997)

85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Durable consumer goods: Shipment



85

90

95

100

105

110

115

120

125

130

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Durable consumer goods: Inventory


85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Non-durable consumer goods: Production


85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Non-durable consumer goods: Shipment


85

90

95

100

105

110

115

120

125

130

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Non-durable consumer goods: Inventory


3

• In 1997, production and shipment of “Cars and motorcycles”, which accounts for approximately 70% of the weight of “durable consumer goods”, increased even in the phase after the increase in consumption tax rate, to May and June, respectively. Since the momentum for shipment was weak compared to production, inventory expanded after March.

• In this current phase, inventory is increasing significantly amidst a slowdown in production and shipment, demonstrating a different movement than in 1997.

• “For culture and amusement”, which makes up approximately 20% of the weight of “durable consumer goods”, is slowing down in this current phase. The decrease in production of “For culture and amusement” is impacted greatly by the decrease in desktop computers and notebook computers, and the decrease in shipment is greatly affected by a decrease in flat-screen televisions, etc.

~ Inventory of “Cars and motorcycles” increased significantly, amidst a slowdown of production and shipment ~ 【Characteristics】


Source: Created based on “The Indices of Industrial Production.”

【Analysis Point 7】 ~ The momentum for recovery of tertiary industry activity is becoming weaker in this current phase ~

Source: Created based on “Indices of Tertiary Industry Activity.”

Comparison of “Cars and motorcycles” and “For culture and amusement” with the Previous Increase in Consumption Tax Rate

(April 1997, April 2014 = 100, seasonally adjusted)

Comparison of Indices of Tertiary Industry Activity with Previous Increase in Consumption Tax Rate (April 1997, April 2014 = 100, seasonally adjusted)

60

80

100

120

140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"Cars and motorcycles": Production


60

80

100

120

140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"Cars and motorcycles": Shipment


60

80

100

120

140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"For culture and amusement": Production


60

80

100

120

140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"For culture and amusement": Shipment


60

80

100

120

140

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"For culture and amusement": Inventory


85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015


60

80

100

120

140

160

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

"Cars and motorcycles": Inventory


4

• In 2014, the width of decrease at the time of the increase in consumption tax rate for “Retail industry for appliances”, “Retail industry for general merchandise” (department stores, supermarkets, etc.), and “Retail industry for food and beverages” was greater than in 1997.

• “Retail industry for appliances” and “Retail industry for general merchandise” have been continuing on a recovering trend since May, contributing to recovery of “Retail industry”.

• On the other hand, “Wholesale industry for appliances” is showing a weak movement as compared to “Retail industry for appliances”. • The inventory rate (commodity stocks at the end of term / monthly commodity sales × 100) of “Electrical appliances for household use”

in June 2014 was 97.0%, up by 20.5% as compared to the same quarter of the previous year. The possibility that inventory that has expanded is being sold is plausible.

• The width of decrease from the peak for “Retail industry for automobiles” was smaller than in 1997, but when comparing the phases after an increase in consumption tax rate, the momentum for recovery is weaker in this current phase. Rather than saying that there was a sudden drop in April, it can be considered that the decreasing trend starting in February of this year is ongoing.


Source: Created based on “Indices of Tertiary Industry Activity.”


~ In the retail industry for machinery and appliances, there is the possibility that inventory that has expanded is being sold ~

In this current phase, production and shipment are weak and the momentum for recovery of tertiary industry activity is weak as compared to the phase after the increase in consumption tax rate in 1997. Expansion of inventory is becoming stronger, and there is also the possibility that recovery of demand is not directly linked on a short-term basis to recovery of domestic production. An eye should be kept on future trends as well.

Comparison of Activity Index of “Retail Industry” with the Previous Increase in Consumption Tax Rate (April 1997, April 2006 = 100, seasonally adjusted)

85 90 95

100 105 110 115 120 125

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industryCurrent (Consumption tax increase in April 2014)Previous (Consumption tax increase in April 1997)

85 90 95

100 105 110 115 120 125 130 135 140 145

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industry for general merchandise


85 90 95

100 105 110 115 120 125

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industry for dry goods, apparel and apparel accessories


85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industry for food and beverages


85 90 95

100 105 110 115 120 125 130 135

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industry for automobilesCurrent (Consumption tax increase in April 2014)Previous (Consumption tax increase in April 1997)

85 90 95

100 105 110 115 120 125 130 135 140 145 150 155 160 165

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Activity in retail industry for appliancesCurrent (Consumption tax increase in April 2014)Previous (Consumption tax increase in April 1997)

85

90

95

100

105

110

115

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Reference: Activity in wholesale industry



85

90

95

100

105

110

115

120

4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4

19962013

19972014

19982015

Reference: Activity in wholesale industry for appliances



Source: “Commercial Sales Statistics.”

Changes in Inventory Rate of “Electrical machinery and apparatus for household use”

80.5

74.3

81.7

79.5

97.0

70

75

80

85

90

95

100

6 9 12 3 6

2013 2014

（%）

(Month/year) 5

Changes in the Indices of Production Capacity of Japan’s Manufacturing Industry

~When looking at the indices of production capacity on a long-term basis, after the downturn of the crisis in the financial system in 1997, as well as the global economic stagnation in 2008, Japan has entered a new stage~


Changes in the Indices of Production Capacity and Operating Ratio (2010 = 100)

~ As the indices of operating ratio shifted downward after the 13th business cycle, the indices of production capacity is on a decreasing trend, and there is a new relationship between the indices of operating ratio and production capacity ~


Note: The shadowed portions represent recession periods. Source: “Indices of Industrial Production”


• The indices of operating ratio reached major turning points in 1991, at the time of the “collapse of the bubble economy” and in 2008, during the “global economic crisis caused by the financial crisis in the United States.”

• The indices of production capacity entered a stock adjustment phase, triggered by the “crisis in the financial system” in 1997. Its recovery process ended once due to the global economic stagnation of 2008, and Japan is now entering a new stage.

• Up until the 12th business cycle, which includes the period before the collapse of the bubble economy and the period after the collapse, the indices of production capacity was fundamentally rising, and a repeated horseshoe shape (increase in operating ratio increase in capacity decrease in operating ratio) can be seen.

• Since the indices of operating ratio shifted

downward after the 13th business cycle, the graph is shifting in the leftward direction. In addition, since the indices of production capacity is showing a large decrease and modest increase with no horseshoe can be seen, a new relationship between the indices of operating ratio and production capacity is generated.

Recurrence Relation between the Indices Production Capacity and Operating Ratio

(2010 = 100) 【Characteristics】

Note: The indices of operating ratio is seasonally adjusted. The indices of production capacity (end-of-period rates) is the original index. Source: Created based on “Indices of Industrial Production.”

70

80

90

100

110

120

130The Indices of Production capacity (general/original index)The Indices of Operating Ratio (general/seasonally adjusted)

(Year)

95.8 95.1

70

80

90

100

110

70 80 90 100 110 120 130

Prod

uctio

n ca

paci

ty

Operating ratio

9th business cycle10th business cycle11th business cycle12th business cycle13th business cycle14th business cycle15th business cycleTentative 16th business cycle

6

• In responses from survey objects regarding reasons for fluctuations in the indices of production capacity, “reexamination” was frequent. This assumes a change in personnel structure, rather than a physical variation in facilities. Thus, a relational expression that explains the indices of production capacity in terms of capital stocks and labor input was estimated.

• Looking at the results, in the phase of decrease in the indices of production capacity after 2009, the indices of production capacity was lowered by reducing the number of permanent employees, rather than reducing capital stock.


Sources: Created based on “The Indices of Industrial Production”, “System of National Accounts” (Cabinet Office) and “Monthly Labor Statistics” (Ministry of Health, Labour and Welfare).


~ In the stage of decrease in the indices of production capacity starting in 2009 , the number of permanent employees was cut back and replaced with capital stock ~

Factorial Analysis Based on Estimation of the Indices of Production Capacity (quarterly basis) (2010 = 100,

contribution rate compared to same quarter of previous year)

• Production capacity ＝0.75 × Capital stock0.33 × Permanent employee index0.63

• Compensating coefficient of determination (R2): 0.94 t value: Capital stock 13.25, permanent employee index 26.93 【Analysis Point 4】


~ When thinking of the “turning point” for the indices of production capacity index, the average at the point in time when the quarter-over-quarter change rises upwards is110.5, which is still insufficient based on current standards ~

• When thinking of the “turning point” for the indices of production capacity, the number of timing at which the change from the previous quarter of the indices of production capacity rises upwards was 11 after the 9th business cycle. The average of standards of the indices of operating ratio of these 11 points was 110.5, and this can be thought of as one of the rough indicators for the timing at which the indices of production capacity increases.

• In the second quarter of 2014, the indices of operating ratio decreased to 101.4, which is insufficient for the indices of production capacity to rise upwards.

Operating Rate Index Standards for Timing at which the Indices of Production Capacity Rises Upwards

(2010 = 100)

• In the second cycle of decline in production capacity after the collapse of the bubble, production capacity decreased due to a reduction in permanent employment, rather than a decline in capital stock. Capital stock itself is increasing due to capital investment based on a purpose other than capacity enhancement, such as maintenance and repair investment. As there is also the fact that the overseas capital investment ratio is increasing, the excess domestic supply capacity also decreased and under conditions of special demand, such as in the first quarter of this year, imports end up increasing.

• Based on past experience, the standards for the operating rate index at which the indices of production capacity turns upward are not achieved with the current operating rate, and we are still only halfway on the path to reach an upward rise in the indices of production capacity. Note: The indices of operating ratio is seasonally adjusted. The indices

of production capacity (end-of-period rates) is the original index. Source: Created based on “The Indices of Industrial Production.”

- 2.5

- 2.0

- 1.5

- 1.0

- 0.5

0.0

0.5

1.0

I

└

II

2009

III IV

┘

I

└

II

2010

III IV

┘

I

└

II

2011

III IV

┘

I

└

II

2012

III IV

┘

I

└

II

2013

III IV

┘

I

2014

Employment Capital stock

Comparison to endof previous quarter

(%)10 1984 1Q 116.4 89.2 0.4

1987 2Q 111.7 95.8 0.51992 2Q 113.2 105.6 0.41994 1Q 102.7 105.9 0.51995 1Q 109.5 105.8 0.21996 4Q 111.8 105.9 0.12004 1Q 110.5 96.3 0.12004 3Q 112.1 96.0 0.22007 3Q 117.3 100.3 0.72008 3Q 111.4 101.7 0.1

15 2011 3Q 99.0 99.8 0.1Mean 110.5 - -

Operating ratio Capacity

11

12

14

Cycle Quarter

7

1. Trends of All Industrial Activities (1) Outline of all industrial activities

Changes in the Indices of All Industrial Activities (2005 = 100)

Notes: 1. Since the indices of Agriculture, Forestry & Fisheries Production contain no data corresponding to the Indices of All Industrial Activities for quarters, these figures were calculated without them.

2. The annual values and % change from the same quarter of the previous year are original indices, and others are based on seasonally adjusted indices.

Ratio to the Previous Quarter, Index Level (2005 = 100, seasonally adjusted) Contribution Ratio to Growth Rate

【Characteristics】 • The indices of all industrial activities decreased for the first time in six quarters, down by 3.3% from the

previous quarter. • The indices of tertiary industry activities, industrial production, and construction industry activity decreased.

III2013

IV┘

I└

II2014

- 4

- 3

- 2

- 1

0

1

2（%）

Indices of Industrial Production Indices of Tertiary Industry ActivityIndustries of Construction Industry Activity Indices of Government Services, etc.Indices of All Industry Activities

70

75

80

85

90

95

100

105

110

115

I└

II2009

III IV┘

I└

II2010

III IV┘

I└

II2011

III IV┘

I└

II2012

III IV┘

I└

II2013

III IV┘

I2014

II

Indices of All Industry Activities Indices of Construction Industry ActivityIndices of Industrial Production Indices of Tertiary Industry ActivityIndices of Government Services, etc.

2012 2013 2014II III IV I II III IV I II

96.5 97.3 96.6 96.2 96.1 96.5 97.1 97.6 97.9 99.5 96.21.2 0.8 -0.2 -0.4 -0.1 0.4 0.6 0.5 0.3 1.6 -3.3－－ 2.6 -0.2 -0.3 -1.2 0.6 1.8 1.9 3.2 -0.9

Indices of Agriculture, Forestry and Fisheries Production 91.8 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

% Change from the Previous Quarter (Year) 0.8 ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

% Change from the Same Quarter of the Previous Year －－・・・・・・・・・・・・・・・・・・・・・・・・・・・

Indices of Construction Industry Activity 76.8 84.8 75.8 77.0 79.3 80.0 82.9 86.5 88.9 86.5 82.7% Change from the Previous Quarter (Year) 3.2 10.4 1.3 1.6 3.0 0.9 3.6 4.3 2.8 -2.7 -4.4% Change from the Same Quarter of the Previous Year －－ 4.9 3.1 6.7 5.4 8.8 13.0 13.4 8.1 -0.4Indices of Industrial Production 92.3 91.6 93.6 90.5 88.9 89.3 90.7 92.3 94.0 96.8 93.1% Change from the Previous Quarter (Year) 0.1 -0.8 -2.1 -3.3 -1.8 0.4 1.6 1.8 1.8 3.0 -3.8% Change from the Same Quarter of the Previous Year －－ 5.5 -4.2 -5.9 -7.8 -3.1 2.2 5.7 8.3 2.6Indices of Tertiary Industry Activity 99.3 100.0 99.0 99.0 99.3 99.8 100.1 100.2 100.0 101.8 97.9% Change from the Previous Quarter (Year) 1.4 0.7 0.0 0.0 0.3 0.5 0.3 0.1 -0.2 1.8 -3.8% Change from the Same Quarter of the Previous Year －－ 2.1 0.5 0.7 -0.1 1.3 1.2 0.5 2.1 -2.2Indices of Government Services, etc. 97.9 97.8 98.0 98.0 98.1 97.8 97.8 97.6 98.0 97.5 98.2% Change from the Previous Quarter (Year) 0.3 -0.1 0.0 0.0 0.1 -0.3 0.0 -0.2 0.4 -0.5 0.7% Change from the Same Quarter of the Previous Year －－ 0.6 0.4 -0.1 0.3 -0.2 -0.5 0.0 -0.3 0.4

% Change from the Same Quarter of the Previous Year

2012 2013

Indices of All Industrial Activities Quarter (Year)

% Change from the Previous Quarter (Year)

8

(2) Outline of industrial activities 1) Production trends


Changes from the Previous Quarter, Contribution Ratio to Growth Rate

Changes in the Indices of Industrial Production (by type of goods)


2) Production trends by item 【Characteristics】

Changes from the Previous Quarter by Item and Contribution Ratio(Note) (second quarter of 2014)

Note: Degree of contribution to total growth rate of -3.8% (% points)

-4

-2

0

2

4

III2013

IV┘

I└

II2014

(%)

Producer goods

Non-durable consumer goodsDurable consumer goods

Construction goods

Capital goods

Industrial production

・ The indices of industrial production for the second quarter of 2014 decreased for the first time in six quarters, down by 3.8% from the previous quarter.

・ By type of goods, decreases were observed in all goods, such as producer goods and capital goods. ・ By type of business, production in all 16 industries, including chemicals and transport equipment industry,

decreased.

50

60

70

80

90

100

110

120

I└

II2009

III IV┘

I└

II2010

III IV┘

I└

II2011

III IV┘

I└

II2012

III IV┘

I└

II2013

III IV┘

I2014

II

Industrial production Capital goodsConstruction goods Durable consumer goodsNon-durable consumer goods Producer goods

<Major items that decreased during the second quarter of 2014> 1) Semiconductor products machinery (for the first time in three quarters) 2) Large passenger cars (for the first time in three quarters) 3) Desktop computers (for the first time in five quarters) <Major items that increased during the second quarter of 2014> 1) Machining centers (for the second consecutive quarter) 2) Reaction vessels (for the second consecutive quarter) 3) Steel bridges (for the first time in three quarters)

Item that Contributed to DecreaseChanges fromthe PreviousQuarter (%)

Contributionratio

(% points)Item that Contributed to Increase

Changes fromthe PreviousQuarter (%)

Contributionratio

(% points)1) Semiconductor products machinery -26.2 -0.40 1) Machining centers 48.3 0.242) Large passenger cars -3.5 -0.20 2) Reaction vessels 363.8 0.113) Desktop computers -22.9 -0.14 3) Steel bridges 33.0 0.114) Notebook computers -23.3 -0.13 4) Airframe parts (incl. propellers and rotating wings) 15.1 0.105) Drive, transmission and control parts -4.7 -0.11 5) Photovoltaic modules 13.2 0.08

9

3) Shipment trends


Ratio to the Previous Quarter, Contribution Ratio to Growth Rate

Changes in Export Shipments and Domestic Shipments in relation to the Indices of Industrial Production (2010 = 100, seasonally adjusted)

Ratio to the Previous Quarter, Contribution Ratio to Growth Rate

Changes in the Indies of Industrial Shipments (by type of goods) (2010 = 100, seasonally adjusted)

Source: “The Indices of Industrial Domestic Shipments and Exports”

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ShipmentsFor exportsFor domestic

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(%) For domesticFor exportsShipments

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Industrial production Capital goodsConstruction goods Durable consumer goodsNon-durable consumer goods Producer goods

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6

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(%)

Producer goods

Non-durable consumer goodsDurable consumer goodsConstruction goods

Capital goods


• The indices of industrial shipments for the second quarter of 2014 decreased for the first time in four quarters, down by 6.8%.

• By demand, shipments for domestic demand decreased for the first time in four quarters, and shipments for exports decreased for the second consecutive quarter.

• By type of goods, decreases were observed in all goods, such as producer goods, capital goods, and non-durable consumer goods.

10

Changes in Inventory Cycle

4) Inventory trends


Changes in the Indices of Industrial Production Inventory (by type of goods) (2010 = 100, seasonally adjusted)


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(%) Producer goods

Non-durable consumer goodsDurable consumer goodsConstruction goods

Capital goods


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Industrial productionCapital goodsConstruction goodsDurable consumer goodsNon-durable consumer goodsProducer goods

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-40 -30 -20 -10 0 10 20 30 40

% C

hang

e in

inve

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y fr

om th

e en

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e qu

arte

r of t

he p

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% Change in production from same quarter of the previous year

2014 II

2008Ⅰ

Inve

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just

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t sta

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Inve

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y ac

cum

ulat

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stag

e



• The indices of industrial inventories for the second quarter of 2014 increased for the second consecutive quarter, by 4.6% as compared to the previous quarter.

• By type of goods, increases were observed mainly in durable consumer goods and capital goods. • By type of business, production in 13 industries, including transport industry , increased. • The inventory cycle shifted from an inventory accumulation stage to an expanding inventory stage.

11

(3) Outline of tertiary industry activities 1) Trends by type of business 【Characteristics】

Note: The line graph shows the indices of tertiary industry activities of six major industries.

Changes in Indices of Tertiary Industry Activities of Major Industry Sectors (2005 = 100, seasonally adjusted)

Changes in Indices of Tertiary Industry Activities (2005 = 100)

Note: The annual figures and the changes from the same quarter of the previous year are based on the original indices, while the others are based on seasonally-adjusted indices.

7580859095

100105110115120125

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Electricity, Gas, Heat Supply & Water Information & CommunicationsTransport & Postal Activities Wholesale Trade & Retail TradeFinance & Insurance Medical, Health Care & WelfareTertiary Industry

2012 2013 2012 2013 2014Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ

Tertiary Industry 99.3 100.0 99.0 99.0 99.3 99.8 100.1 100.2 100.0 101.8 97.9(% Changes from the Previous Quarter (Year)) 1.4 0.7 0.0 0.0 0.3 0.5 0.3 0.1 -0.2 1.8 -3.8(% Changes from the Same Quarter of the Previous Year) －－ 2.1 0.5 0.7 -0.1 1.3 1.2 0.5 2.1 -2.2

Electricity, Gas, Heat Supply & Water 99.9 98.1 98.4 98.3 99.5 98.5 98.1 97.7 98.5 99.6 96.9(% Changes from the Previous Quarter (Year)) 0.3 -1.8 -2.7 -0.1 1.2 -1.0 -0.4 -0.4 0.8 1.1 -2.7(% Changes from the Same Quarter of the Previous Year) －－ -0.5 0.1 0.1 -4.8 -0.7 -0.9 -0.6 1.2 -1.3Information & Communications 107.8 109.9 107.9 108.0 107.7 108.6 109.6 110.4 110.9 111.8 109.3(% Changes from the Previous Quarter (Year)) 0.9 1.9 0.4 0.1 -0.3 0.8 0.9 0.7 0.5 0.8 -2.2(% Changes from the Same Quarter of the Previous Year) －－ 0.7 1.0 -0.7 0.4 2.0 2.5 2.8 2.8 -0.3Transport & Postal Activities 100.8 102.4 100.3 100.2 101.0 101.6 102.1 102.7 103.0 106.3 102.9(% Changes from the Previous Quarter (Year)) 2.6 1.6 -0.6 -0.1 0.8 0.6 0.5 0.6 0.3 3.2 -3.2(% Changes from the Same Quarter of the Previous Year) －－ 3.5 1.4 1.7 0.0 1.8 2.5 2.0 4.8 0.8Wholesale Trade & Retail Trade 91.0 89.3 91.0 90.8 90.6 89.7 89.4 88.8 89.1 93.1 84.5(% Changes from the Previous Quarter (Year)) -0.1 -1.9 0.1 -0.2 -0.2 -1.0 -0.3 -0.7 0.3 4.5 -9.2(% Changes from the Same Quarter of the Previous Year) －－ 1.0 -1.0 -0.5 -2.1 -1.6 -2.6 -1.3 4.0 -5.6Finance & Insurance 98.9 105.6 98.9 98.7 99.7 104.0 106.5 105.2 106.3 104.8 101.4(% Changes from the Previous Quarter (Year)) 1.6 6.8 1.2 -0.2 1.0 4.3 2.4 -1.2 1.0 -1.4 -3.2(% Changes from the Same Quarter of the Previous Year) －－ 3.2 0.4 2.4 6.9 8.7 6.4 5.0 0.8 -4.7Real Estate & Goods Rental and Leasing 98.1 97.9 97.9 98.2 98.1 98.1 97.9 98.3 97.3 97.0 96.3(% Changes from the Previous Quarter (Year)) -0.2 -0.2 -0.2 0.3 -0.1 0.0 -0.2 0.4 -1.0 -0.3 -0.7(% Changes from the Same Quarter of the Previous Year) －－ -0.6 0.1 0.0 0.0 -0.1 0.2 -0.9 -1.1 -1.6Scientific Research, Professional and Technical Services 100.7 101.6 100.9 100.1 100.4 99.3 102.9 103.9 99.8 100.0 99.3(% Changes from the Previous Quarter (Year)) 5.0 0.9 1.1 -0.8 0.3 -1.1 3.6 1.0 -3.9 0.2 -0.7(% Changes from the Same Quarter of the Previous Year) －－ 6.1 3.2 3.7 -4.1 2.5 5.6 -0.8 0.1 -3.1Accommodations, Eating and Drinking Services 103.9 104.8 103.2 104.0 104.6 104.6 105.4 104.9 104.5 105.2 105.5(% Changes from the Previous Quarter (Year)) 2.5 0.9 -0.8 0.8 0.6 0.0 0.8 -0.5 -0.4 0.7 0.3(% Changes from the Same Quarter of the Previous Year) －－ 4.4 1.2 -0.6 0.0 2.4 0.8 0.1 0.8 0.2Living-Related and Personal Services & Amusement Services 89.3 89.7 89.4 89.0 89.3 89.7 88.9 90.6 90.1 91.1 88.0(% Changes from the Previous Quarter (Year)) 3.4 0.4 -0.2 -0.4 0.3 0.4 -0.9 1.9 -0.6 1.1 -3.4(% Changes from the Same Quarter of the Previous Year) －－ 6.7 0.4 -1.7 -0.4 -0.7 2.0 0.9 1.7 -1.0Learning Support 81.8 81.2 81.9 81.6 81.8 81.7 80.8 80.9 81.1 81.1 80.0(% Changes from the Previous Quarter (Year)) 1.2 -0.7 0.0 -0.4 0.2 -0.1 -1.1 0.1 0.2 0.0 -1.4(% Changes from the Same Quarter of the Previous Year) －－ 2.3 1.1 0.4 0.0 -1.8 -1.0 -0.6 -0.7 -0.9Medical, Health Care & Welfare 117.8 120.1 116.8 118.1 119.3 119.5 120.0 120.4 120.8 121.2 122.4(% Changes from the Previous Quarter (Year)) 3.2 2.0 0.4 1.1 1.0 0.2 0.4 0.3 0.3 0.3 1.0(% Changes from the Same Quarter of the Previous Year) －－ 2.7 2.5 3.8 1.3 2.7 2.6 1.2 1.8 1.7Compound Services 83.3 80.9 84.3 82.7 82.7 80.6 82.2 80.2 80.2 81.6 79.5(% Changes from the Previous Quarter (Year)) -2.2 -2.9 1.6 -1.9 0.0 -2.5 2.0 -2.4 0.0 1.7 -2.6(% Changes from the Same Quarter of the Previous Year) －－ 0.3 -3.8 -1.3 -3.5 -0.9 -3.7 -4.0 1.0 -3.1Miscellaneous Services (Except Government Services, etc.) 100.6 100.0 100.5 100.0 100.5 100.9 100.5 100.1 98.2 102.0 97.6(% Changes from the Previous Quarter (Year)) 0.5 -0.6 0.3 -0.5 0.5 0.4 -0.4 -0.4 -1.9 3.9 -4.3(% Changes from the Same Quarter of the Previous Year) －－ -0.2 -0.8 1.1 0.2 -0.2 0.5 -2.9 1.1 -2.8

Type of business (Division)

• Tertiary Industry activities for the second quarter of 2014 decreased by 3.8% from the previous quarter, down for the first time in two quarters.

• By type of business, activities in 11 out of the 13 types of business in broad category, including Wholesale Trade & Retail Trade, decreased. On the other hand, activities in two types of business, including Medical, Health Care & Welfare, increased.

12

2) Trends of broad-ranging personal services and broad-ranging business services 【Characteristics】

Changes in the Indices of Broad-ranging Personal Services and Broad-ranging Business Services



Note: Broad-ranging personal services and broad-ranging business services are designations based on the reclassification of all the components of the Indices for Tertiary Industry Activity. These components have been reclassified as services for businesses and services for individual customers. Of the weighting of 10,000.0 for the entire Indices for Tertiary Industry Activity, broad-ranging personal services comprises 4,203.1 and broad-ranging business services comprises 5,796.9.

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2

Broad-ranging personal servicesBroad-ranging business servicesTertiary industry activity (overall)

（%）

90

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105

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Tertiary industry activity (overall) Broad-ranging personal servicesBroad-ranging business services

• Dividing tertiary industry activity for the second quarter of 2014 into two categories of broad-ranging personal services and broad-ranging business services shows that broad-ranging business services decreased by 4.2% from the previous quarter and broad-ranging personal services also decreased by 3.4 % from the previous quarter, both down for the first time in two quarters.

13

(1) Outline of supply trends for final demand 1) Supply trends of all industries 【Characteristics】 • Supply for final demand of domestic products as a whole decreased by 2.7% from the previous quarter,

down for the first time in six quarters. • Overall industrial supply for consumption decreased by 2.3% from the previous quarter, down for the first

time in six quarters. • Overall industrial supply for investment decreased by 5.6% from the previous quarter, down for the first

time in seven quarters. • Exports decreased by 2.5% from the previous quarter, down for the first time in three quarters, and imports

decreased by 5.6% (id.), down for the first time in six quarters.

2. Supply Trends for Final Demand

(2005 = 100, ratio to the previous year (quarter))

Notes: 1. As the indices of all industries (final demand components) are calculated using various statistical data, preliminary figures are used for some basic data. Therefore, note that the indices of the previous quarters have been corrected to the revised figures.

2. Ratios to the previous year are original indices and other figures are based on seasonally adjusted indices. Source: “The Indices of All Industries Activity”

Changes in the Indices of All Industries (Final Demand Components)

2012 2013 2012 2013 2014Ratio to

theprevious

year

Ratio tothe

previousyear

II III IV I II III IV I II

Total of final demand sector 0.9 0.6 -0.3 -1.2 -0.1 0.7 0.3 0.7 0.5 1.2 -2.7Mining and manufacturing (Goods) -1.3 -2.3 -4.6 -7.9 -0.4 4.8 -1.7 0.0 1.3 5.6 -6.7Tertiary industries (Services) 1.3 0.1 0.1 0.1 0.2 0.0 -0.1 0.2 0.1 1.3 -2.1

Consumption 1.2 -0.2 -0.1 -0.3 -0.4 0.0 0.3 0.1 0.2 1.5 -2.3Personal consumption 1.1 -0.4 -0.5 -0.8 -0.5 0.5 0.0 0.1 0.3 2.2 -3.7

Mining and manufacturing (Goods) 0.3 -1.3 -1.5 -2.7 -3.3 1.1 1.7 0.4 1.0 3.4 -4.9Tertiary industries (Services) 1.5 -0.2 -0.2 0.3 0.3 0.0 -0.4 0.1 0.0 1.6 -3.1

Government consumption 1.4 0.5 0.1 0.3 0.6 -0.3 0.2 0.1 0.2 -0.2 0.6Investment 2.4 3.9 2.0 -1.2 0.1 0.4 1.9 2.7 2.7 1.4 -5.6

Public investment 8.5 12.5 7.8 -1.4 2.5 0.9 4.3 7.6 2.3 -3.4 -1.3Private housing 1.8 7.5 2.2 0.3 2.2 1.6 3.0 1.0 2.9 0.0 -9.4Private corporation facilities 0.5 0.0 0.3 -1.9 -1.4 0.1 0.8 1.0 2.5 4.0 -5.9

Mining and manufacturing (Goods) 3.7 -0.7 2.6 -6.2 -1.1 0.6 0.1 2.1 5.7 5.5 -7.2Construction -4.1 5.0 -2.2 0.1 -2.5 3.1 4.6 1.9 -0.7 -2.1 0.0Tertiary industries (Services) -0.5 -2.0 0.2 0.4 -1.5 -1.2 -0.6 1.0 0.1 4.2 -7.1

Exports -1.5 2.6 -1.7 -5.0 -1.6 6.8 0.9 -0.2 1.8 4.1 -2.5Mining and manufacturing (Goods) -1.8 1.1 -2.2 -6.4 -2.2 7.5 0.2 -1.1 1.7 1.6 -3.6Tertiary industries (Services) 2.6 6.6 -0.9 -4.4 -0.1 7.0 1.7 1.7 3.0 7.7 -1.4

Imports 2.3 3.7 0.8 0.0 -0.8 1.6 1.1 1.8 3.1 5.7 -5.6Mining and manufacturing (Goods) 3.2 3.0 0.8 1.4 -3.0 2.8 0.5 1.3 4.1 2.7 -5.9Tertiary industries (Services) 4.0 5.5 4.8 -1.0 -2.3 4.0 2.4 0.3 4.1 10.9 3.3

14

2) Supply trends for consumption 【Characteristics】

Changes in Overall Supply of Durable Consumer Goods (2010 = 100, seasonally adjusted)

Source: “The Indices of Industrial Domestic Shipments and Imports” (estimates)

Changes in Overall Supply of Non-durable Consumer Goods (2010 = 100, seasonally adjusted)


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160

180

200

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Durable consumer goods For houseworkFor heating and cooling For furniture and equipmentFor culture and amusement Cars and motorcycles

• Looking at the trends of consumption in the second quarter of 2014, in terms of supply from mining and manufacturing, the overall supply of durable consumer goods decreased by 10.9% from the previous quarter, down for the first time in four quarters. The overall supply of non-durable consumer goods decreased by 3.2% from the previous quarter, down for the first time in two quarters.

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Non-durable consumer goods For houseworkFor culture and amusement Clothes and footwearFood and beverage

15

3) Supply trends for investment 【Characteristics】 • The trends of investment in the second quarter of 2014, in terms of supply from mining and manufacturing

(overall supply of capital goods) decreased by 9.3% from the previous quarter, down for the first time in four quarters.

Changes in Supply from Mining and Manufacturing (Overall Supply of Capital Goods) (2010 = 100, seasonally adjusted)


405060708090

100110120130140150160170180190200

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Capital goods For production equipmentFor electric power For communication and broadcastingFor agriculture For constructionFor transport For office workFor others

16

(2) Outline of exports and imports 1) Export trends

Changes in Exports by Region (Goods, 2010 = 100, seasonally adjusted)

2) Import trends 【Characteristics】 • Looking at the trends of imports for the second quarter of 2014 (on a quantity basis), in terms of the indices

of all industries (final demand components), imports of services (tertiary industry) increased by 3.3% from the previous quarter, while imports of goods (mining and manufacturing industry) decreased by 5.9% (id.), resulting in a 5.6% decrease from the previous quarter for all imports.

• By region, imports of goods from the Middle East, East Asia, ASEAN, United States and Europe decreased.

Notes: 1. The export index by region is estimated by rearranging the trade statistics into shipment index groups, and the import index by region is estimated by rearranging the trade statistics into supply index groups.

2. The names of each country or region are as follows: ASEAN: Singapore, Thailand, Malaysia, Philippines, Indonesia, Vietnam, Myanmar, Laos, Brunei and Cambodia East Asia: Republic of Korea, Taiwan and China (including Hong Kong) Middle East: Iran, Iraq, Bahrain, Saudi Arabia, Kuwait, Qatar, Oman, Israel, Jordan, Syria, Lebanon, United Arab Emirates, Gaza and Yemen

Sources: “The Indices of Industrial Domestic Shipments and Exports,”

“The Indices of Industrial Domestic Shipments and Imports” (both estimates)

Changes in Imports by Region (Goods, 2010 = 100, seasonally adjusted)

【Characteristics】 • Looking at the trends of export goods and services for the second quarter of 2014 (on a quantity basis), exports

of goods (mining and manufacturing industry) decreased by 3.6% from the previous quarter and export of services (tertiary industry) decreased by 1.4% from the previous quarter, resulting in a 2.5% decrease from the previous quarter for all exports.

• By region, exports of goods to East Asia, ASEAN, United States and Europe decreased, while those to the Middle East increased.

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Total U.S.Europe ASEANEast Asia ChinaMiddle East

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Total U.S.Europe ASEANEast Asia ChinaMiddle East

17

analysis of all industrial actities the second quarter of 2014 summary

Economy & Finance

previous increase

consumption tax ratechanges

consumption tax rate2010

consumption tax rage2010

inventory expanding

inventory level

consumption tax2010

consumption taxapril