Recent Ecomonic Situation for Japan
1. Overview of the Japanese Economy
The Japanese economy is presently continuing its gradual recovery (figure 1-1 and 1-2).
Demand side: Personal consumption is on its way to gradual recovery (figure 3-1 and 3-2).
Supply side: Industrial production has recently been on a gradual rise, except for a dip in March. Corporate profits in general show a trend of modest rise, except deterioration noticed in small and medium-sized businesses. In general, Corporations judge business conditions as gradually improving.
Employment situation: It continues to be severe in spite of some partial signs of improvement. The unemployment rate stands continuously at a high level (figure 4).
2. Progress in Structural Reform
(1) Basic Policy Directions
Trends in the business cycle entangled with structural changes, cast uncertainty over the prospect of the Japanese economy. Of particular concerns are the lingering aftereffects of the bursting of the bubble economy, such as a heap of non-performing loans held by financial institutions, and the "hollowing out" of Japanese industry due to excessive regulations and Japan's "high-cost" structure.
Against these backdrops, the Japanese government is taking necessary measures to further economic recovery and maintain its momentum for stable mid- and long-term economic growth. These measures include expansion of domestic demand,resolution of non-performing loans 
, and promotion of efficient land use as well as structural reform policies such as deregulation.
(2) Implementing Deregulation Policies
The purpose of deregulation is to create new industries by stimulating competition, rectifying Japan's high-cost structure, and calling forth innovative new ideas from private entrepreneurs. Deregulation is also effective in improving the access of the Japanese market and consequently in harmonizing the Japanese economy with the international economy.
The Japanese government is steadily implementing the Deregulation Action Program, a three-year program to streamline regulations. The government also maintains the principle of keeping any new regulations to the barest minimum (figure 5).
3. Redressing the External Imbalance
Over the past few years, the structure of the Japanese economy has been undergoing major transformation, and its trade structure has been rapidly changing. Japan's imports, for instance, have risen dramatically since 1993 (figure 6). Among the imported items, manufactured products has registered rapidly growing share since 1992 (figure 7). This trend demonstrates that Japan's trade structure is going through major changes both in quantitative and qualitative terms. Japan's trade surplus has been continuously dwindling since December 1994, helping steady redress of Japan's external imbalance steadily (figure 8-1 and 8-2).
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