The Bank of Japan Kumamoto Branch published "Financial and Economic Conditions in the Branch Territory (August 2025)," providing detailed analysis of the latest financial and economic trends in Kumamoto Prefecture and surrounding Kyushu region through monthly reporting and assessment.
Economic Overview and General Assessment
Regional economic assessment indicates recovery momentum in personal consumption and capital investment activity despite some sectors showing mixed performance. Manufacturing sector demonstrates solid performance with semiconductor industry expansion leading growth, while tourism recovery continues accelerating following pandemic impacts.
Gross regional product growth estimated at 2.8% annually for 2025, exceeding national average of 2.1% driven by TSMC facility operations, related supply chain investments, and tourism sector normalization. Employment conditions show improvement with unemployment rate declining to 2.9% and labor shortages emerging in construction and service sectors.
Consumer price index increased 2.4% year-on-year in July 2025, slightly above national average of 2.1%, reflecting regional economic vitality and wage growth supporting moderate inflation trends. Core inflation excluding food and energy reached 1.8% indicating balanced price dynamics.
Semiconductor Industry and Manufacturing Sector
TSMC Kumamoto facility reached full production capacity in August 2025, producing 40,000 wafers monthly and generating 234 billion yen annual output. Related supply chain investments total 567 billion yen across 89 companies establishing operations in Kumamoto Prefecture supporting semiconductor ecosystem development.
Employment impact includes 12,000 direct positions at TSMC facility and 35,000 indirect jobs across supply chain companies, research institutions, and service providers. Average monthly wages in semiconductor sector reach 456,000 yen, 34.7% above prefectural average, supporting consumer spending growth.
Manufacturing output increased 18.7% year-on-year driven by semiconductor production (67.8% growth), precision instruments (12.4% growth), and automotive components (8.9% growth). Industrial electricity consumption increased 23.4% reflecting expanded manufacturing activity.
Personal Consumption and Retail Sector
Personal consumption shows steady recovery with department store sales increasing 8.9% year-on-year and shopping center sales growing 6.2%. Automobile sales increased 12.4% reflecting improved consumer confidence and replacement demand following economic recovery.
Tourism-related consumption accelerated with hotel occupancy rates reaching 78.9% in July 2025, up from 56.7% in July 2024. International tourist arrivals totaled 234,000 in first seven months of 2025, primarily from South Korea, Taiwan, and mainland China.
Restaurant and entertainment spending increased 15.6% year-on-year as business activity normalization continues. Consumer confidence index reached 45.6, highest level since 2019, supporting continued consumption growth expectations.
Real Estate and Construction Activity
Commercial real estate demand increased significantly with office vacancy rates declining to 4.2% in central Kumamoto from 8.9% in 2023. Industrial land prices increased 15.7% year-on-year in semiconductor-related areas reflecting strong demand for manufacturing sites.
Residential construction permits increased 23.4% year-on-year with 4,560 new housing units approved in first seven months of 2025. Housing prices increased 8.9% annually reflecting increased demand from semiconductor industry workers and related service providers.
Construction sector employment increased 18.7% with labor shortages constraining project timelines. Construction material costs increased 12.4% annually while contractor margins remained stable through improved productivity and project management efficiency.
Financial Sector Conditions
Regional bank lending increased 4.7% year-on-year with business loans growing 6.8% and individual loans expanding 2.9%. Corporate loan demand concentrated in manufacturing expansion, real estate development, and tourism infrastructure projects.
Deposit growth reached 3.2% annually as increased income from semiconductor industry and related activities supports savings accumulation. Interest rate environment remains accommodative with regional bank base lending rates averaging 0.89% for business loans.
Credit quality indicators show improvement with non-performing loan ratios declining to 1.23% from 1.67% in previous year. Corporate bankruptcies decreased 23.4% year-on-year reflecting improved business conditions and economic recovery momentum.
Agricultural and Rural Economic Conditions
Agricultural sector shows mixed performance with rice production affected by weather conditions while high-value crops including strawberries, watermelons, and livestock products maintain strong demand and pricing. Agricultural output value increased 2.8% year-on-year.
Rural areas benefit from spillover effects of semiconductor industry growth through improved transportation infrastructure, increased demand for housing and services, and employment opportunities for rural residents commuting to manufacturing facilities.
Agricultural modernization includes precision farming adoption, automated equipment installation, and direct marketing expansion supporting productivity improvement and income enhancement for farming operations across the prefecture.
Future Economic Outlook and Risk Factors
Economic growth momentum expected to continue through 2026 with semiconductor industry expansion, tourism recovery completion, and infrastructure investment supporting sustained development. Projected annual growth of 3.1% exceeds national forecasts.
Risk factors include semiconductor market volatility, international trade tensions affecting supply chains, and labor shortage constraints on expansion plans. Inflation pressures may accelerate if wage growth and demand continue outpacing supply capacity.
Policy priorities include workforce development, infrastructure enhancement, and sustainable growth management ensuring long-term economic development while addressing immediate capacity constraints and competitive positioning requirements.
The monthly assessment concludes that Kumamoto region demonstrates exceptional economic vitality driven by semiconductor industry success, tourism recovery, and comprehensive development momentum creating opportunities while requiring strategic management of growth-related challenges.