When the Bank of Japan adopted the zero interest rate policy around two years ago, public investment for the first quarter of 1999 increased (+13.3%) compared with the previous year. In contrast, private demand such as household consumption and business investment declined (-2.0%) in the same period. However, this contrast has been gradually reversed during the last two years.
In the third quarter of this year, public investment decreased (-4.1%) on a year-on-year basis while private demand grew (+1.1%). In other words, the gradual upturn in private demand is strengthening while the fiscal stimulus has turned negative. Under these conditions, corporate profits as a whole are expected to record a double-digit increase for the second consecutive year.