FUNDAMENTAL ANALYSIS OF JAPAN

Table of Contents
Gross Domestic Product (GDP) ........................................................................................................... 2
Retail Sales .......................................................................................................................................... 3
Unemployment Rate ........................................................................................................................... 4
Industrial Production Index................................................................................................................. 5
Balance of Payments ........................................................................................................................... 6
Consumer Price Index (CPI)................................................................................................................. 7
Tankan Survey ..................................................................................................................................... 8
Trade Balance...................................................................................................................................... 9
Leading and Coincident Indices of Business Conditions ................................................................... 10

Submitted by: Nikhil Taneja - 17CSU125

Gross Domestic Product (GDP)
IMPACT ON MACRO ECONOMY: HIGH

It is the sum of domestically produced goods and services expressed in prices. The indicator value, at
the time of its release, is usually well-predicted by the market based on other data, so it rarely
affects the market. It is released quarterly. The index value is repeatedly revised.

Gross Domestic Product is considered in the three independent components:

• GDP as the sum in money for all goods and services produced by business entities, plus
taxes, minus subsidies on production of certain goods and services.

• GDP as the amount of funds spent on consumption of goods and services produced, plus
export, minus import of goods and services.

• GDP as the amount of the revenue the economy as a whole (i. e. salaries, taxes, balance
profit of businesses, etc.)

The index has a significant impact on the market.

Source: Economic and Social Research Institute.

Retail Sales
IMPACT ON MACRO ECONOMY: HIGH

The indicator reflects changes in the level of retail sales. The statistics includes department stores
and supermarkets. Retail Sales Index is one of the indicators of consumer spendings. Therefore being
an indicator of consumer demand and confidence it can serve as a benchmark for the currency
market at the turning points of the economic cycle. It has little impact on the market.

Source: Ministry of Economy, Trade and Industry.

Unemployment Rate
IMPACT ON MACRO ECONOMY: MEDIUM

A higher unemployment rate reflects the high efficiency of workforce application, but also can
jeopardize economic recovery as it promises accumulation, not consumption. The indicator is taken
into account by the market.

Source: Japanese Ministry of Health, Labour and Welfare.

Industrial Production Index
IMPACT ON MACRO ECONOMY: MEDIUM

The index of industrial production. It shows changes in industrial production in the country. The
growth of this index leads to growth of the national currency. It has a significant impact on the
market.

Source: Ministry of Economy, Trade and Industry.

Balance of Payments
IMPACT ON MACRO ECONOMY: MEDIUM

The balance of payments systematically summarizes all economic transactions between residents
and nonresidents of the country or geographical area. The balance of payments is information on
international transactions; it includes the country's or territory's current account balance (goods,
services, income, current transfers). It is the difference between the amount of payments received
from abroad, and the amount of payments moving abroad.

Source: Japanese Ministry of Finance.

Consumer Price Index (CPI)
IMPACT ON MACRO ECONOMY: MEDIUM

Consumer Price Index is the main indicator of inflation in the country. In other words, inflation
reflects a decline in purchasing power of the yen, so for every yen you can buy fewer goods and
services. In terms of measuring inflation, CPI is the most obvious way to quantify changes in
purchasing power.

The report tracks changes in the price of a basket of goods and services. An increase in the index
indicates that it takes more yen to purchase this same set of basic consumer items.

The indicator is taken into account by the market.

Source: Ministry of Internal Affairs and Communications.

Tankan Survey
IMPACT ON MACRO ECONOMY: MEDIUM

Tankan Survey is a quarterly economic review published by the Research and Statistics Department
of the Bank of Japan. Review is based on estimates of more than 8000 companies, firms and
institutions on the following economic parameters:

• business conditions;

• production and marketing;

• supply and demand, the price level;

• income;

• direct investment;

• employment;

• tax conditions.

Tankan is the most important Japanese indicator. The growth of the index indicates improvement in
economic conditions and promotes the growth of the Japanese yen.

Source: Bank of Japan.

Trade Balance
IMPACT ON MACRO ECONOMY: MEDIUM

Trade Balance is the difference between the total value of exports and the total value of imports. A
positive trade balance shows the demand of goods of the country on the international market, as
well as the fact that the country does not consume all that it produces. A negative trade balance
suggests that the country consumes foreign goods together with it own goods.

Because Japan is an export-oriented country, this information gives a critical insight into the
development of the country's economy and changes in foreign exchange rates.

A positive trade balance acts as an appreciating weight on the yen.

Source: Ministry of Finance, Customs Office

Leading and Coincident Indices of Business Conditions
IMPACT ON MACRO ECONOMY: LOW

The index of leading indicators is a weighted average of 13 major indicators. It is used for
determining the future state of the economy. The index of coincident indicators is composed of 11
indicators and is used for assessing the current state of the economy (the 50% level of the indicator
is "zero"). They have little effect on the market.

Source: Economic and Social Research Institute.