Key points

　The Kansai economy, which had been decelerating since last summer, showed signs of bottoming out at the beginning of this year. However, the recovery in both internal and external remand has been weak, and the recovery in the Kansai has been noticeably slower to start than the national average.

　Since the beginning of the year, exports have been edging lower. By country or region, shipments to the US and ASEAN countries have been recovering, but the downward trend of shipments to the Asian NIEs and EU has been slowing, shipments to China, which account for a large proportion of the whole, are still falling. Imports have been edging higher, in conjunction with the rise in fossil fuel prices. The balance of trade has been a mixture of positive and negative elements.

　In the corporate sector, Kansai companies’ plans for capital investment in fiscal 2012 represent a year-on-year increase in investment for the first time in two years. However, construction starts figures and corporate perception of overcapacity suggest that there is no basis for a rise in capital investment. Although corporate earnings show signs of bottoming out, the break-even ratio has also risen due to the downward trend of earnings. Thus the conditions for capital investment are not ideal.

　In the household sector, the pace of recovery of employment and income conditions shows signs of peaking, but at present remains steady.

　Turning to the outlook for the world economy in 2013, among the developed nations, the firmness of the US economy and the stagnation of the European economies are likely to become more evident. China is likely to maintain steady growth. The world economy as a whole is likely to see real growth of 3.5% in 2012 and 3.9% in 2013. During this period, given that substantial growth led by external demand cannot be expected, and that the potential for a self-sustaining recovery in internal demand is low, the prospects for the Japanese economy are likely to be influenced by the timing of the introduction of policy measures. During fiscal 2012, when reconstruction demand will boost the economy, real growth is likely to be 2.3%. In 2013, when a last-minute demand rush is likely to occur prior to the raising of the consumption tax rate, it is likely to be 1.5%.

　Electric power shortages in the Kansai Region this summer are likely to have only a limited direct impact, in spite of planned power cuts. However, the indirect impact of the “possibility” that there will be power cuts in the form of (1) holding back on medium-to-long term capital investment in the Kansai Region and (2) a decline in the value of the Kansai brand overseas, is likely to be on a scale that cannot be disregarded.

　An examination of the trend of Kansai exports to China and the Asian NIEs reveals that, since last year, the Region has not been able to benefit adequately from the economic growth of these countries. Even if their growth rates rise in the future, it is likely that the Kansai’s exports to these countries will not rise very far.

　Moreover, because demand for reconstruction in the wake of the Great East Japan Earthquake will be limited in the Kansai Region, the Region’s real economic growth rate for fiscal 2012 is likely to remain below the national average, at 1.0%. Because reconstruction demand across the country as a whole will peak in fiscal 2013, the economies of the Kansai and of Japan as a whole are likely to synchronize and record growth of 1.5%. If the Kansai Region is to return to rapid growth, it will need large-scale industries capable of drawing advantage from economic growth in Asia.

　Large-scale supply of office space in Osaka city center has until now been on a scrap-and-build basis. Whether this metabolism continues will also be a focus of interest from the viewpoint of enhancing the attractiveness of the city.

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