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Released: Tuesday, November 8, 2011

The Conference Board Leading Economic Index®  (LEI) for Japan decreased 0.7 percent The Conference Board Coincident Economic Index®  (CEI) increased 2.3 percent in September.

  • The Conference Board LEI for Japan fell again in September, and has declined for five of the past seven months. Housing starts had its largest monthly fall since mid-2007, and real operating profits* as well as the six-month growth rate of labor productivity also made large negative contributions to the index this month. With the decline in September, the six-month change in the leading economic index continued to slow – to -3.3 percent (about a -6.6 percent annual rate), significantly down from the increase of 0.1 percent (about a 0.2 percent annual rate) for the previous six months. In addition, the weaknesses among the leading indicators have been more widespread than the strengths in recent months. 
  • The Conference Board CEI for Japan, a measure of current economic activity, increased sharply in September, due to a rebound in employment (**see notes on page 2). However, industrial production and the retail, wholesale, and manufacturing sales component both fell this month.  With the large gain in September, the six-month change in the coincident economic index has returned to positive territory – increasing by 2.4 percent (about a 4.8 percent annual rate), a reversal from the decline of 1.9 percent (about a -3.8 percent annual rate) for the previous six months. Meanwhile, real GDP growth has been declining for three consecutive quarters, falling by 2.1 percent (annual rate, revised down from 1.3 percent) in the second quarter of 2011, following a 3.7 percent decline (annual rate) in the first quarter.
  • The Conference Board LEI for Japan continued its downward trend, which started in March of this year, and its six-month growth also continued to decline. Meanwhile, The Conference Board CEI for Japan gained sharply in September mainly due to a rebound in employment, and its six-month growth rate picked up as a result. Nevertheless, the strengths among the coincident components during September were not very broad. Taken together, the composite indexes and their components suggest that the current economic downturn is likely to continue in the near term. 

LEADING INDICATORS.  Five of the ten components that make up The Conference Board LEI for Japan increased in September.  The positive contributors to the index – in order from the largest positive contributor to the smallest – include the new orders for machinery and construction component*, business failures (inverted), real money supply, interest rate spread, and the Tankan business conditions survey.  The negative contributors – in order from the largest negative contributor to the smallest – include dwelling units started, real operating profits*,  the six-month growth rate of labor productivity,  the index of overtime worked,  and stock prices.    

With the decrease of 0.7 percent in September, The Conference Board LEI for Japan now stands at 92.8 (2004=100).  Based on revised data, this index decreased 0.3 percent in August and increased 0.9 percent in July.  During the six-month span through September, the index decreased 3.3 percent, and three of the ten components advanced (diffusion index, six-month span equals 30.0 percent).

COINCIDENT INDICATORS.  Two of the four components that make up The Conference Board CEI for Japan increased in September. The positive contributors to the index – in order from the larger positive contributor to the smaller – include number of employed persons** and wage and salary income.  Industrial production and the retail, wholesale, and manufacturing sales* component declined in September.

With the increase of 2.3 percent in September, The Conference Board CEI for Japan now stands at 98.9 (2004=100).  Based on revised data, this index decreased 0.1 percent in August and decreased 0.3 percent in July.  During the six-month span through September, the index increased 2.4 percent, and three of the four components advanced (diffusion index, six-month span equals 75.0 percent).

DATA AVAILABILITY AND NOTES.  The data series used to compute The Conference Board Leading Economic Index®  (LEI) for Japan and The Conference Board Coincident Economic Index® (CEI) for Japan reported in this release are those available “as of” 5:00 P.M. ET November 7, 2011.  Some series are estimated as noted below.

* The series in The Conference Board LEI that are based on our estimates are real operating profits and new orders for machinery and construction.  The series in The Conference Board CEI that is based on our estimates is real retail, wholesale and manufacturing sales.

**According to The Statistics Bureau and the Director-General for Policy Planning of Japan, figures in the Number of Employed Persons series from the three regions (Iwate, Miyagi and Fukushima) affected by the March 11th earthquake were missing from March through August 2011.  From September 2011 on, this series again includes data for the whole of Japan. Thus, this series shows a sharp decline in March 2011 and a substantial gain in September 2011.  

THESE DATA ARE FOR ANALYSIS PURPOSES ONLY. NOT FOR REDISTRIBUTION, PUBLISHING, DATABASING, OR PUBLIC POSTING WITHOUT EXPRESS WRITTEN PERMISSION.

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