The Bank of Japan Matsue Branch published "Monthly Report on Financial and Economic Conditions in the Branch Territory (July 2025)," providing detailed analysis of financial and economic conditions across the San'in region covering Shimane and Tottori prefectures.
Regional Economic Assessment and Overall Trends
Regional economic assessment indicates "some weakening movements observed" with mixed performance across sectors reflecting broader national economic conditions and local demographic challenges. Manufacturing sector shows moderate growth while service sectors experience varied performance patterns.
Real GDP growth estimated at 1.2% annually for 2025, below national average reflecting rural economic structure and demographic transition impacts. Employment conditions remain stable with unemployment rate of 2.1%, below national average, though labor force participation continues declining due to aging population.
Consumer price inflation reached 1.8% year-on-year in June 2025, slightly below national average, reflecting moderate demand conditions and regional income levels. Core inflation excluding energy reached 1.4% indicating balanced price dynamics without significant demand pressures.
Manufacturing Sector Performance
Manufacturing output increased 3.2% year-on-year led by electronics component production (8.9% growth), precision instruments (6.7% growth), and food processing (4.3% growth). Export-oriented manufacturers benefit from yen depreciation while domestic demand remains moderate.
Major industrial facilities include electronics assembly operations, automotive component manufacturing, and specialized machinery production serving national and international markets. Industrial production utilizes 67.8% of capacity with room for expansion given adequate demand conditions.
Employment in manufacturing sector increased 2.1% with average monthly wages reaching 324,000 yen, 12.4% above regional average, supporting local consumer spending and economic stability despite overall demographic challenges.
Agriculture and Primary Industry Conditions
Agricultural sector demonstrates resilience with high-quality rice production, premium fruit cultivation, and specialized seafood products maintaining strong market positioning. Agricultural output value increased 1.8% year-on-year despite weather-related challenges.
Seafood industry benefits from Japan Sea resources with snow crab, yellowtail, and traditional seafood processing generating 23.4 billion yen annual value. Export markets include Taiwan, Hong Kong, and mainland China appreciating premium Japanese seafood products.
Agricultural modernization includes precision farming technology, automated equipment adoption, and direct marketing expansion supporting productivity improvement and income enhancement for farming operations adapting to demographic transition.
Tourism Industry and Service Sector
Tourism sector recovery continues with domestic visitor arrivals increasing 12.4% year-on-year reaching 89.7% of pre-pandemic levels. International tourism remains limited with 12,400 foreign visitors in first six months of 2025, primarily from South Korea and Taiwan.
Cultural tourism attractions include Matsue Castle, Izumo Taisha Shrine, and traditional craft centers attracting visitors seeking authentic Japanese cultural experiences. Nature-based tourism includes Daisen National Park and coastal activities supporting rural economic diversification.
Accommodation sector shows improvement with hotel occupancy rates reaching 64.7% in July 2025, up from 52.3% in July 2024. Average daily rates increased 8.9% reflecting improved demand conditions and service quality enhancements.
Financial Sector and Credit Conditions
Regional financial institutions report lending growth of 1.8% year-on-year with business loans increasing 2.4% and individual loans growing 1.2%. Loan demand concentrates in tourism infrastructure, agricultural modernization, and small business working capital requirements.
Deposit growth reached 2.1% annually reflecting stable savings patterns despite low interest rate environment. Regional banks maintain adequate liquidity with deposits exceeding loans by 234 billion yen across the San'in region.
Credit quality indicators remain stable with non-performing loan ratios of 1.89%, above national average but manageable given regional economic conditions. Corporate bankruptcies totaled 23 cases in first half of 2025, unchanged from previous year.
Infrastructure Development and Investment
Transportation infrastructure includes San'in Expressway completion connecting regional centers and reducing travel times to major metropolitan areas. Infrastructure investment totals 67 billion yen annually supporting economic development and connectivity improvement.
Digital infrastructure development addresses rural connectivity challenges through fiber optic network expansion reaching 89.7% of households and 5G coverage improvement supporting business development and quality of life enhancement.
Renewable energy projects include wind power installations totaling 456 MW capacity and solar developments generating 234 MW. Energy projects support environmental objectives while creating rural economic opportunities and energy security benefits.
Population Dynamics and Labor Market
Population decline continues at 0.9% annually with aging rate reaching 35.6%, above national average, requiring economic adaptation strategies and productivity enhancement initiatives. Working-age population decreased 1.4% while elderly population increased 2.1%.
Labor market conditions show selective shortages in healthcare, construction, and specialized manufacturing while traditional sectors experience adequate labor supply. Workforce development programs train 2,340 participants annually in high-demand skills.
Migration patterns include continued outflow of young adults to metropolitan areas offset partially by lifestyle migration of retirees and remote workers attracted to natural environment and lower living costs.
Regional Development Strategy and Policy Response
Regional development strategy emphasizes leveraging natural advantages, cultural heritage, and agricultural excellence for sustainable economic growth despite demographic challenges. Strategic priorities include tourism development, agricultural modernization, and renewable energy expansion.
Government support programs include rural revitalization grants, business development assistance, and infrastructure investment supporting regional economic stability and development opportunities. Total support reaches 89 billion yen annually across various programs.
Inter-regional cooperation includes joint tourism marketing, shared infrastructure development, and economic development coordination with neighboring regions enhancing competitive positioning and resource utilization efficiency.
Economic Outlook and Strategic Challenges
Near-term economic outlook suggests continued moderate performance with tourism recovery, agricultural stability, and selective manufacturing growth supporting regional economic resilience despite demographic headwinds and national economic uncertainties.
Strategic challenges include workforce development, young population retention, and economic diversification requiring comprehensive policy coordination and strategic investment in human capital, infrastructure, and business development opportunities.
The monthly report concludes that San'in region requires adaptive economic strategies leveraging regional strengths while addressing demographic transition through productivity enhancement, quality improvement, and selective growth sector development.