The Bank of Japan Okayama Branch published the Okayama Prefecture Financial and Economic Monthly Report in July 2025, providing a detailed analysis of the prefecture's economic recovery status and the impact of overseas economic uncertainty on the regional economy.
The report assesses that Okayama Prefecture's economy continues its moderate recovery despite some weak movements in certain areas. This represents a complex phase where slowing growth in personal consumption coexists with recovery in manufacturing production. Capital investment centered on non-manufacturing sectors supports the economy, while public investment also increases moderately. The slowing pace of overseas economic recovery and uncertainty in trade policies are affecting local companies.
Personal consumption growth is decelerating with sectoral disparities becoming evident. Department store and supermarket sales show a pause in their increase due to price rises, struggling in real terms. Automobile sales are recovering, aided by easing supply constraints and new model introductions. Home appliance sales are recovering, supported by demand for energy-efficient appliance replacements. Visitor numbers to major tourist sites are steadily increasing, with Korakuen Garden and Kurashiki Bikan Historical Quarter performing well. Consumer frugality is strengthening, with selective purchasing behavior becoming prominent.
Manufacturing production shows widening inter-industry disparities. Transportation machinery is recovering, led by normalization of automobile production and improved parts supply. Electrical machinery is gradually recovering as inventory adjustments in IT-related goods progress. Steel has recovered for automotive applications, but the recovery movement has paused due to declining overseas demand. Chemicals continue weak movements due to the slowing pace of overseas economic recovery. Recovery varies significantly between industries, with sectors more dependent on external demand struggling more.
Capital investment is increasing with companies maintaining a forward-looking stance. Investment amounts for all industries in fiscal 2025 are expected to increase, led by non-manufacturing sectors. DX-related investment, labor-saving investment, and decarbonization-related investment form the three pillars. Manufacturing is also resuming capacity expansion investment, with semiconductor and EV-related sectors being particularly active. Automation and mechanization investments responding to labor shortages are expanding across all industries. Small and medium enterprises are also actively investing in productivity improvements, supported by various subsidy programs.
The employment, income, and price environment remains tight, with the job opening ratio maintaining levels above 1.5. Employee income is improving, driven by spring wage negotiation effects and wage pressure from labor shortages. Consumer prices in Okayama City excluding fresh food remain elevated at mid-3% year-on-year. While energy prices have stabilized, food and service prices continue to rise. Corporate price pass-through is progressing, though it remains a profit pressure factor for small and medium enterprises.
Financial conditions remain stable, with both real deposits and loans in the prefecture increasing moderately. While lending rates have risen somewhat, they remain at low levels, maintaining favorable corporate funding conditions. Trade policies in various countries are creating downward pressure on orders, production, and profits for export-related companies. Uncertainties including US-China trade friction, European economic slowdown, and China's structural adjustments remain extremely high. The dual effects of yen depreciation on rising import costs and improved export competitiveness require careful monitoring.
The report concludes that while Okayama Prefecture's economy continues its moderate recovery, heightened overseas economic uncertainty is affecting regional export-related companies, requiring careful assessment of future developments.