Japan’s key gauge on the state of the economy stood at 14.3 percent in March, staying well below the boom-or-bust line of 50 percent for the second straight month, after February’s 10 percent, the government said Wednesday in a preliminary report.
It is the first time since the economy bottomed out in April 1999 that the index of coincident indicators, designed to measure the current state of the economy, has been below 50 percent for two months in a row, the Cabinet Office said. The last time the index remained in minus territory for more than a month was from August 1997 through December 1998. Government economists consider a reading below 50 percent as a sign of economic contraction, while a figure above that is viewed as a sign of expansion.
The government attributed the dismal showing to the decline in industrial production, on which the Ministry of Economy, Trade and Industry last month downgraded its assessment for a fourth successive month.
“Given the falling trend in production, further attention is needed to monitor moves of the coincident index,” a Cabinet Office economist said, adding that the government’s concern has grown from the previous month with this latest report.
For April, the official anticipates the index will stay below 50 percent, since industrial output is expected to fall 0.8 percent month-on-month in April.
Foreign economies — particularly the United States — and corporate capital investment should be closely monitored to see if the Japanese economy, which has been hit by a sharp slowdown in foreign high-tech demand, will return to recession, he said.
The Cabinet Office also said the indexes of leading and lagging economic indicators were below 50 percent in the reporting month, the first time since October 1998 that all three indexes have been below the 50 percent line.
The leading index, a measure of economic growth six to nine months ahead, stood at 25 percent, below 50 percent for the third consecutive month, and the lagging index, which gauges performance in the recent past, was 30 percent, its first drop below 50 percent in half a year.
Of the seven components so far available for the coincident index, only department store sales were positive in March, while indicators for production, overtime work and investment materials showed substantial declines.
The diffusion indexes of the coincident, leading and lagging indicators compare the current levels of various economic indicators with their levels three months earlier.
Of note among the eight available components for the leading index is an inventory indicator that slipped into the negative column, while an indicator on corporate taxes among five lagging index components showed a similar downturn, the office said.
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