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News Release

Fiscal 2012 Outlook
Growing fears of a slowdown in the Kansai economy

December 8, 2011

Overview

 The Kansai economy entered a stagnation phase in the summer of 2011. Mining and industrial production began to decline in July, when the impact of the Great East Japan Earthquake on the national economy as a whole began to come to an end. The major factor has been a slowdown in exports to China and other Asian countries. In particular, exports to Asian countries other than China have recently fallen below their lowest level in 2010 and show strong signs of slowing. Although China continues to enjoy rapid growth thanks to strong domestic demand, growth rates in the major Asian countries and in the region as a whole have slowed, especially among the NIES, which are highly dependent on external demand.
 With the slowdown of foreign economies, the corporate sector is reporting reduced profits, and an increasing number of companies are postponing capital investment. In the household sector, consumption has been holding steady thanks to the recovery of employment and income conditions and the repercussions of stagnation in the corporate sector will be limited in the short term, but there are moves to reduce overtime working hours in the manufacturing sector, and the outlook is not optimistic.
 Looking at the overall Japanese economy with a view to determining the outlook for the Kansai economy, the decline in the pulling power of external demand and the transfer of production bases overseas mean that growth is likely to be on the slow side until the end of fiscal 2012. However, as there are also prospects of the emergence of reconstruction demand and of a recovery in consumer spending, it will be possible to avoid a slump. During this time, the global economy is likely to continue to slow down. Although the US and Chinese economies will show underlying strength, Europe is likely to experience economic stagnation, and growth of the Asian NIEs and major ASEAN economies is also remain on a level with that recorded in 2011.
 The ratio of shipments to Asia in the Kansai economy’s exports is high, with the result that the region tends to be strongly affected by fluctuation in the Asian economy. On the import side, it is also vulnerable to export drives by Korea and China. Under these conditions, the strength of the yen and electricity shortages will accelerate overseas transfer in the corporate sector. Fiscal 2012 will be a year in which the Kansai economy will experience weak external demand, and it is highly likely that the region will have a trade deficit by the middle of the fiscal year.
 Electricity shortages will be overcome in the winter of 2012, but strenuous efforts to save electricity during the summer months will be indispensable. If the electricity savings achieved are on a par with those made this year, there is a risk of power cuts for 11 days. Making large-scale electricity savings will restrict corporate activity.
 In 2012 the Kansai economy is highly likely to see a slowdown owing to the stagnation of external demand against a backdrop of slow export growth and of import growth and to the sapping of economic activity by electricity supply restrictions. The real economic growth rate is likely to be 0.4%, avoiding negative growth but coming virtually to a standstill.
 Since the Kansai economy is well placed to take advantage of growth in Asia, its potential in the medium-to-long term is high. To harness this potential at a time when companies are having to transfer operations overseas it will be necessary to create new industries. A year after the establishment of the Union of Kansai Governments, it is vital that prefectural governments collaborate in opening up new frontiers. 

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