The OECD leading indicators have not thrown in the towel on Japan’s growth. But Japan’s trends continue to haunt the outlook.

IP for mining and MFG fell by 2.7% in November. MFG output alone fell by 2.7% in November. The chart on sequential growth rates show that on no tenor is Japan’s IP doing better. In the current quarter with two month’s data in IP is declining at a 5.7% annual rate. The transport sector is trying hard to lift that result as it is up at a 24% annual rate in this quarter as it continues to recover from Japan’s disasters of this past year. Still, weakness is dominating the outlook.

Still over the simple recent three month period all main MFG sectors are showing that output is falling sharply. Only mining and electricity and gas output are rising over three months. Overall MFG output is down by 4.2% over 12-months transportation is up by 2.5% over that period underlining the improvement that the transportation sector has been able to achieve. Still the sector-wide MFG drop tells us that revived transportation output has not been enough to restore growth to overall output. And Japan has few tricks left up its sleeve with a slowing global economy and a still-strong exchange rate.

Also MFG output is still some 11% short of its past cycle peak. It is not just recovery from its disasters of the past year but much more work that lies ahead of a real Japanese recovery.

Consumer goods and investment goods output continue to show accelerating declines in the three months ended in November. Japan still seems like a place where things are destined to get worse before they get better.