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Economy in Brief

Japan Slips and its Assessment is Cut…
by Robert Brusca March 19, 2008

Japan’s all-industry index was flat in January. The tertiary index that it tracks so closely was up to 110.3 from 109.5 in December. In terms of year-to-year changes the tertiary and all-industries indices are about the same showing a small bounce in the recent month but holding in a shallow downtrend overall. Mining and MFG are well off peak and the sector moved lower in January to 109.5 from 112.0 in December. This left the year/year change in the index near zero. Over the past several months Japan’s sector indices have more or less held steady in terms of their year/year changes. Even the very weak construction index that fell again in January is steady to a bit higher over 12 months.

Amid these signals the Japanese government has downgraded its assessment of the economy for the second consecutive month in March.The Cabinet Office that issues the assessment cited stalled corporate capital spending and weak industrial production. Private consumption has lagged for time and was also on the laundry list of reason to downgrade the economy. The government said in its March report that "the economic recovery appears to be pausing recently." This pronouncement is a bold contrast to its overview in the February report that held: "the economy is recovering at a moderate pace recently." Things change.

This is the ‘first second’ for a downgrade: It is the first time in this cycle that the government has downgraded its overall assessment of the economy for the second month in a row. Last time it did such a thing was in November and December 2004. The first downgrade in this cycle came in February a period that is not yet covered in the data table below. In February the government lowered its assessment of the economy due to slower growth of exports and industrial production in addition to continuing weakness in private consumption and housing construction. This month’s downgrade features some of the same sectors: capital investment, industrial output and private consumer spending. Japan once again has issues. With the yen now rising, Japan faces challenges and still needs a head at its central bank. …and it’s not a good time to be without monetary leadership.

Up to date Japan Industry Surveys
Recent Months Moving Averages Extremes; Range
3Mo 6Mo 12Mo Max Min %-Tile
All Industry 107.0 107.0 107.4 107.1 107.4 107.3 108.4 93.6 90.5%
Construction 71.5 72.0 72.1 71.9 72.3 76.3 124.6 71.1 0.7%
Mining and MFG 109.5 112.0 110.4 110.6 111.1 109.4 112.2 87.7 89.0%
Tertiary 110.3 109.5 110.5 110.1 110.2 110.1 111.2 91.0 95.5%
Ranges, Max, Min since 1993
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