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Economy in Brief

Japan's Economy Watchers Index Sends Mixed Signals
by Robert Brusca   October 8, 2010

Japan's recovery from its recession seems to progress from end 2008 according to the Economy Watcher's index. Since then index appears to have made a 'bunny-hop' recovery with its current phase being the down portion of the second mini up-cycle.

While the future index is ticking up and the employment index is essentially steady, the current index is sharply lower. That ordering creates somewhat of a conundrum. The weakness in the current index is severe. Ordered by month to month changes, the current month's change ranks 120th out of 128 months of observations. That ranking places it in the bottom six percentile of all ranked monthly changes ranked month-to-month over the past decade.

Still, the other components are nowhere near that weak. Having the future index rising is good news not just because of its name but because it actually does seems to have some true leading properties.

The Teikoku indices echo the message of weakens in the Economy Watchers index which is geared to look at the service sector. But the Teikoku index is not as weak in assessing the service sector nor do other branches of the economy appear as weak as in the Economy watcher's current framework. That's another reason to take solace from the economy watcher's future index.

Still none of these indices sees a real improving trend.

Japan clearly is troubled and the strength of the yen is making its job of recovery even harder to accomplish. Japan remains on the ropes.

Key Japanese Surveys
  Raw Readings of Each Survey Percentile of 5Yr Range*
  Sep-10 Aug-10 Jul-10 Jun-10 Sep-10 Aug-10 Jul-10
Diffusion  
Economy Watchers 41.2 45.1 49.8 47.5 61.1% 70.5% 81.9%
 Employment 51.4 51.3 55.5 56.3 75.3% 75.1% 82.5%
 Future 41.4 40.0 46.6 48.3 61.0% 57.4% 74.4%
NTC MFG 49.5 50.1 52.8 54.0 72.3% 74.7% 84.6%
Econ Trends (Teikoku'/50 neutral/weighted diffusion)
 MFG 35.4 35.9 36.7 35.3 59.3% 60.7% 63.2%
 Retail 31.8 33.2 33.7 31.8 53.3% 59.6% 62.0%
 Wholesale 32.8 33.5 33.7 32.7 52.0% 54.3% 55.1%
 Services 33.1 33.6 33.7 32.9 37.5% 38.2% 38.4%
 Construction 26.0 25.6 26.1 24.6 35.8% 33.7% 36.4%
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