Japan's three main sectors MFG, Construction and Services have not been making much headway. It is not surprising that Japan's GDP contracted again in Q4. But the Teikoku sector indices which are plotted in the graph above shows a slightly more optimistic picture than the METI indices on sectors. In their setting the Teikoku indices took a set back early in the year but have re-grouped and are growing again, albeit more slowly.

Still the Teikoku readings are weak. The service and construction indices stand below the 40th percentile of their respective ranges. Wholesaling and manufacturing are the strong sectors and at that they are just short of residing in the 60th percentile of their respective ranges. Japan's retail sector hovers just below the 50th percentile of its range.

Still, as the table shows the LEI stands in the 97th percentile of its range; it is a much more upbeat and forward looking measure.

The BoJ has changed its outlook of the economy. It is beginning to say this episode of deflation is being put behind it and sees progress in the economy at large. Perhaps Japan's Q4 decline in GDP will prove to be an isolated quarter of bad news for Japan. While that is possible Japan's economic signals continued to be murky and not vibrant. Japan is locked into China's orbit since China is its largest trading partner and China is struggling, comparatively. It is too soon to get too optimistic on Japan but maybe not be too soon to think about getting optimistic on Japan.