Japan’s key economic index for forecasting economic activity six to nine months ahead plunged below the boom-or-bust line of 50 percent in April for the first time in 14 months, the Economic Planning Agency said Monday.
The diffusion index of leading economic indicators stood at a preliminary 28.6 percent for April, the EPA said.
However, Yoshihiko Senoo, head of the agency’s Business Statistics Research Division, said the decline was a result of several “irregular factors” and that the substantial level of the leading index was higher than 28.6 percent.
The diffusion index of coincident indicators, which gauges the current state of the economy, came to 62.5 percent — above the crucial line for the 12th consecutive month.
“The coincident index showed a mild improvement in general. . . . Based on that index, Japan’s economy still remained on a recovery path,” Senoo said.
The EPA calculates the diffusion indexes as a percentage of indicators showing an improvement from corresponding numbers logged three months before.
Any reading above 50 percent is considered to indicate an economic expansion, while a reading below that level is taken as a sign of contraction.
Senoo said the decline of the leading index was largely due to “unusually high levels” of several indicators in January, the month the April statistics were compared with.
He said the automobile-related indicator was higher than normal in January because of active registration of new-model cars released last fall. As a result, the index fell in April.
Indicators related to housing and building construction starts were similarly high in January.
“The setback of the leading index may be a single-month movement as a result of those irregularities in January,” Senoo said.
The index may be revised upward when the agency recalculates the figure with additional data later this month, he added.
As for the coincident index, Senoo said indicators related to production remained on a gentle recovery trend.
While the indicators concerning employment and spending showed some improvement, the basic levels of those indicators were still severe.
The diffusion index of lagging indicators, used to confirm economic peaks and troughs in the recent past, stood at 50 percent in April, the EPA said.
The index remained below the 50 percent line for 30 straight months until March, as the March index was revised downward to 42.9 percent from the previously reported 50 percent.