Japan Sector Indices Show Improvement-Except Construction

Japan's all Industries Index rose today by 1.8% a bit less than expected but the strongest rise in several months. This move jolts the all industries index up to the 42nd percentile of its range, a sharp improvement from the 29th percentile where it languished last month. The industrial reading has moved up to reside in the 63rd percentile of its range the tertiary index made a strong move this month but still only perches in the 35th range percentile. Still, that is a sharp improvement from the 13th percentile reading from one month ago. Japan's sector indices have made some sharp moves in the past month but still emit some pretty low-grade signals.

On balance Japan's indicators show improvement. The LEI fell back in April but it still resides in the 90th percentile of its five year range. The Teikoku sector indices paint a roughly similar picture of the sectors as the METI sector indices, both of which have them improving, but still at weak reading.

The economy-watchers indices have a stronger outlook overall. The readings all are in the 80th percentile of their respective five-year ranges but the readings also have moved up sharply in recent months.

Japan's various surveys show different aspects of the economy's condition. Clearly and all of them agree that there has been improvement. The standing of the various sectors is not in complete agreement by the various measures but the there are no glaring differences on key points: For example construction is the weakest sector and MFG is recovering the most and the fastest. The economy watcher-indices are more up beat than the sector surveys and the LEI which is more forward-looking and so can't really be compared with the other readings says that the economy is in a solid upswing.

Still, Japan, like a lot of countries, has policy concerns and its new Prime Minister has said he wants to attack Japan's debt problems. The rating service Fitch has said that the next two months will be crucial in determining if his debt reduction credentials will erode or not. It's hard to get an economy both to shift into recovery mode and to attack a long-building excessive debt problem. But Japan, like a number of other countries, is going to try to do just that.

Key Japanese Surveys   Raw readings of each survey Percentile of 5Yr range*   Apr-10 Mar-10 Feb-10 Jan-10 Apr-10 Mar-10 Feb-10 Diffusion Economy Watchers 49.8 47.4 42.1 38.8 81.9% 76.1% 63.3%   Employment 56.0 51.3 48.0 44.3 83.3% 75.1% 69.3%   Future 49.9 47.0 44.8 41.9 82.8% 75.4% 69.7% NTC MFG 53.8 52.7 52.5 52.5 88.2% 84.1% 83.4% Econ Trends (Teikoku'/50 neutral/weighted diffusion)   MFG 33.4 31.0 28.2 26.6 50.2% 42.6% 34.1%   Retail 30.1 29.3 26.7 25.9 40.7% 34.9% 24.6%   Wholesale 31.5 28.9 26.4 24.6 45.5% 36.3% 27.7%   Services 31.5 29.5 28.0 26.6 30.5% 23.9% 18.7%   Construction 23.3 23.5 22.5 21.0 23.3% 24.4% 19.6% Key Japanese Sector Surveys   Raw readings of each survey Percent of 5Yr range* Indices Apr-10 Mar-10 Feb-10 Jan-10 Apr-10 Mar-10 Feb-10 Biz Activity(METI:Indices) 95.7 94.0 94.7 96.8 42.5% 29.9% 35.1% Construction 71.7 74.9 78.2 75.0 0.0% 1.5% 13.9% Industry 96.0 94.8 93.7 94.3 63.6% 60.5% 57.6%   Tertiary(services) 97.6 95.6 98.3 98.8 35.2% 13.2% 42.9% LEI 101.7 101.9 98.1 96.9 90.6% 91.2% 78.9% percentiles: 100 is high; Zero is low