It may be hard to believe, but the nation’s current economic expansion has probably lasted about 41 months and will next month match Japan’s third-longest postwar boom.
That is what the the Economic Planning Agency predicted Mar. 24 after analyzing the results of the diffusion index, the second-most important economic statistic after gross domestic product. The agency said the diffusion index of coincident economic indicators reflects the present state of the economy and stood at a reading of 90.0 percent for the month, extending its stay above the crucial 50 percent boom-or-bust line to five consecutive months, from September 1996.
An EPA official said the key economic index’s movements on a whole suggest the economy remains on a recovery course. However, in January the diffusion index of leading economic indicators declined below the boom-or-bust line for the first time in five months, the EPA said. The indicator, which predicts economic trends about six months ahead, stood at 44.4 percent on a preliminary basis.
Although the index of leading indicators has dropped below the crucial line, it is still within a range of irregularity, the official said. Thus, if the coincident index continues to stay above the 50 percent line through April, he said, the economy will have kept expanding for 42 straight months, tying for third the longest economic boom in the postwar period — between June 1958 and December 1961.
The government has said the current economic boom, although feeble, began in October 1993 and has continued ever since. But the judgment of boom or bust is on the whole determined artificially in Japan. In the U.S. and other countries, booms and busts are specifically defined in statistical terms, regardless of the government’s interpretation.
The EPA official added that the agency will first have to gauge the effects of the April 1 consumption tax hike from 3 percent to 5 percent to calculate whether the economy will continue its course of expansion.