• Kyodo News

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The key index of current economic conditions showed further deterioration in February amid the global recession, but some future indicators declined at a slower pace, prompting the government to say Monday that “bright developments” can be seen.

The composite index, or CI, of coincident economic indicators fell 2.7 points from January to 86.8 against the 2005 base of 100, the lowest since 86.3 was registered in April 2002, the Cabinet Office said in a preliminary report.

The rate of fall matched the average market projection in a Kyodo News survey.

The CI consists of various indicators such as industrial production, overtime work hours and retail sales.

Slower industrial output continued to weigh on the economy while there was weakness in both wholesale and retail businesses.

The office said the economy has been “worsening,” keeping intact its basic assessment for the ninth straight month.

However, the government also said the situation may have begun taking on a brighter look.

The index of leading indicators, which predicts developments over the next several months, lost 2.0 points to 75.2. But the office noted that the pace of slide slowed from the 2.2 percent declines in January and December and 3.6 percent slip in November.

“We can’t be too optimistic as the index itself continued to move downward,” a Cabinet Office official said.

But he also said that because some indicators saw a slower pace of decline or showed improvement, “it’s not that (we’re in) a completely negative or dark environment.” “We’re seeing some bright developments,” he said.

The future indicators such as consumer confidence and business outlook for small and midsize companies showed signs of an upturn, the office said.

The index of lagging indicators, which measure performance in the recent past, stood at 90.5, down 0.8 point from January.

BOJ policy meeting

The Bank of Japan began a two-day policy meeting Monday and is expected to discuss whether to implement additional measures to ensure smooth fund supply, while holding its key interest rate steady at 0.1 percent.

In response to the global financial crisis, the BOJ has introduced a series of special measures including the outright purchase of commercial paper, or short-term debt issued by companies, and corporate bonds from financial institutions.

At its previous policy meeting in mid-March, the BOJ said companies’ fundraising activities in financial markets to cover the end of fiscal 2008 through March 31 had almost been completed, but that markets were likely to remain under stress in the new fiscal year given the severe financial and economic conditions.

The BOJ is expected to discuss whether to implement additional measures.

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