Junko Nakagawa: Economic activity, prices, and monetary policy in Japan

Speech by Ms Junko Nakagawa, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Shimane, 7 March 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I. Current Situation of Economic Activity and Prices

A. Current Economic Developments Abroad

I would like to begin my speech by talking about the current situation of overseas economies.

The pace of recovery in overseas economies has slowed on the whole. Although business sentiment for the services industry has been above the break-even point between improvement and deterioration, it has become lower as the momentum from the reopening of the economy following the COVID-19 pandemic has dissipated (Chart 1). Business sentiment for the manufacturing industry has been around the break-even point between improvement and deterioration. Despite being affected by the slowdown in the pace of recovery in the global economy, world trade volume has shown signs of bottoming out because of progress in inventory adjustments for intermediate and IT-related goods.

Let me briefly explain developments in major overseas economies. In the United States, while monetary tightening has been affecting the real estate and housing markets, the economy has been firm, mainly led by private consumption and the favorable employment and income situation. Although it has been widely reported that China's GDP growth rate for 2023 surpassed 5 percent, the country's economy has remained on a moderate slowing trend, with weakness being seen in the real estate market and in those sectors involving external demand. European economies have also continued to slow moderately, partly affected by developments in the Chinese economy.