Haver Analytics
Haver Analytics
| May 11 2023

Japan’s Economy Watchers Index Rises; Expectations Improve

Japan's economy watchers index improved in April to 54.6 from 53.3 in March. March had improved to 53.3 from 52.0. The index has been increasing steadily over 12 months. It is higher by 5.1 points over 12 months, by 3.8 points over 6 months and by 6.1 points over 3 months. A lot of improvement has come in the last few months.

In April, all the diffusion readings in the economy watchers current index are above 50, indicating expansion for the category, with two exceptions: housing and manufacturers. Housing has a 46.1 diffusion reading and has been below 50 for several months running. The manufacturing index has been vacillating, but the April value of 49.6 shows only a very slight contraction in progress in manufacturing.

To evaluate these diffusion indexes by seeing where they stand relative to historic data, refer to the queue standing column at the far-right hand portion of the table. Among the ten entries under the current index, six have queue percentile standing in the top 10% of values since April 2002. All readings stand above the 50th percentile signaling that all are above their historic medians for this period. Among the headline and the nine components, the headline and seven components show increases on all horizons: over 12 months, over 6 months and over 3 months.

The future readings for the economy watchers index also show steady increases with the 55.7 diffusion index in April, better than its 54.1 diffusion reading in March which exceeds the 50.8 reading for February. The future headline also shows gains over all three horizons: over 3 months, over 6 months and over 12 months. Like the current index, all the percentile queue standings for the future index are above the 50th percentile mark - all categories are above their historic medians. In addition, the headline and six components have standings in their top ten percentile.

The raw diffusion readings for April in the future index show only housing below 50 in its diffusion value. And like with the current index, housing has a string of sub-50 diffusion readings. However, its queue standing remains above its 50th percentile on data back to 2002.

Not only is the current assessment quite upbeat but so is the outlook assessment from the future index.

Summing up The economy watchers index is upbeat. The chart shows that it has been trending up since 2020 and since late 2021 the cycles have been muted considerably. Beginning in early 2022, the index began to be quite stable and late in 2022 and early 2023 a persistent uptrend has taken hold for the current index, the future index, as well as for the current-conditions employment situation. Japan's economy is making solid progress toward growth and doing so with monetary policy on an even keel and with inflation only moderately over the target sought by the Bank of Japan.

  • Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media.   Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.

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