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Economy in Brief

Prospects for Japan's Q2 2009 Improving
by Louise Curely 6, 2009

Japan's Composite Leading and Coincident Indexes of Business Conditions continued to improve in May, as shown in the first chart.

The leading indicator index was 77.0 (2005=100) in May, after having increased 0.6%, 0.6% and 0.8% in May, April and March, respectively.  The coincident indicator at 86.9 in May was 1.1% higher than April, which, in turn, was 1.4% above March.  These improvements suggest that economic conditions in the second quarter should be considerably better than those in the first quarter, when GDP declined at an annual rate of 14.2%.  Since 2000 there has been a correlation of .86 between the period to period changes in the quarterly composite coincident indicator and real GDP, as can be seen in the second chart.

Another forward looking indicator is the Synthetic Consumption Index.  This index, which combines demand side statistics (Family Income and Expenditure Surveys, etc.) and supply  side statistics (Indexes of Industrial Producers' Shipments, etc.), has risen in the last three months and now stands at 104.91 (2000=100).  Since 2000, there has been a correlation of .85 between the period to period percent change in the quarterly Synthetic Consumption Index and in the Private Consumption component of GDP, as shown in the third chart. 

JAPAN  May 09 Apr  09 Mar 09 Feb 09  Jan 09 Ave Apr/May  Q1 09
Composite Indicators of Business Conditions (2005=100)              
  Leading Indicators 77.0 76.2 75.5 74.1 76.2 77.6 75.3
  Coincident Indicators 86.9 86.0 84.8 85.2 88.0 86.5 86.0
Synthetic Consumption Indicator (Real 2000=100) 104.91 104.31 103.71 102.88 104.33 104.61 103.64
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