Home> News Release> News Release 2009> Kansai economy seeks a recovery led by companies that are also competitive outside the region - Outlook for the Kansai economy in FY 2010 -

Back to the previous page
News Release

Kansai economy seeks a recovery led by companies that are also competitive outside the region
— Outlook for the Kansai economy in FY 2010 —

December 10, 2009


The Lehman Shock triggered a sharp slump in the global economy. Bold fiscal and monetary measures have allowed some national economies to pull out of the acute phase of the contraction, but the relatively high growth achieved by many countries in the April-June and July-September 2009 was partly a reaction to the abnormally sharp contraction that had come before and partly due to the effects of economic policy measures, and economic trends are likely to remain unstable. However, as the economies of China and of Asia at large are thought to be better equipped than the developed economies to recover from the worst phase of the recession, the exports of the Kansai region, of which shipments to Asia account for a large proportion, are likely to increase.

A study of past capital investment adjustment phases in the manufacturing sector indicates that capital investment does not begin to recover as early as corporate earnings. This is because it takes some time for companies to ascertain economic conditions, review their investment plans and make the decision to go ahead with implementing those plans. Corporate earnings will start to rise as sales start to recover from the low during the worst phase of the recession, but it will be fiscal 2011 before capital investment begins to recover.

Employee remuneration has fallen sharply as employment levels have been adjusted and deteriorating corporate performance has started to affect special cash earnings in earnest. Mining and manufacturing production has recovered since the worst phase of the recession, and this will have a positive impact on non-scheduled cash earnings and employment, but many companies remain cautious about actively increasing employment levels. Since special cash earnings tend to be decided on the basis of corporate performance their recovery is likely to be delayed until fiscal 2011. The severity of employment and income conditions suggests that the impact of budgetary constraints will be considerable and that the growth of consumer spending will be weak.

At a time when little can be expected from other sources of demand, exports and transfers will play a leading role. The Kansai region's manufacturing facilities have continued to grow and, as production using the increased capacity commences, the supply of manufactured goods and components to users overseas and in other regions of Japan will increase, boosting export and transfer figures. The real economic growth rate of the Kansai Region is set to turn positive in 2010, for the first time in three years, reaching 0.7%.

After the collapse of the bubble economy, the Kansai's business sentiment diffusion index was almost always below the national average, but during the last economic growth phase, from 2004 onwards, it rose above the national average, suggesting that the Kansai economy had begun to revive. After the Lehman Shock, the relationship of the business sentiment diffusion indices of the Kansai region and Japan as a whole was reversed once more. Yet this does not signify that the Kansai is again sinking; rather, it is a short-term phenomenon triggered by the economic downturn. As the corporate sector begins to recover, business sentiment among companies in the Kansai region will also strengthen and the index is likely to rise above the national average once more.

In other regions besides the Kansai, it is increasingly apparent that only companies that are able to keep abreast of their competitors in every aspect of business management (technology, product planning, marketing, etc.) will be able to survive the present harsh economic climate. Even if these companies are able to lead an economic revival in the Kansai region, it is by no means certain that many other companies will be able to benefit passively from the recovery. As the recovery progresses, the gap between companies that are doing well and those that are in decline will, if anything, widen.

News Release

To view the PDF files,
you need Adobe Reader installed.
Adobe Reader downloadExternal link