— Japan June Prelim Leading CI +0.3 Pt M/M, 1st Rise In 3 Months
— Cabinet Office Repeats: CI Shows Japan Economy Improving

TOKYO (MNI) – Japan’s coincident composite index (CI), which
reflects current business conditions, rose 0.1 point to 101.3 in June,
after posting the first drop in 14 months in May (-0.1 point at 101.2),
the Cabinet Office said on Friday.

The rise in the index was led by increases in producers’ investment
goods shipments (excluding transport equipment), the ratio of job offers
to job seekers and large industrial power consumption, all of which
rebounded after slumping in the previous month.

The index was set at 100 in the 2005 base year.

The Cabinet Office repeated its recent assessment based on the
coincident CI that was adopted for October 2009 data, saying the index
“shows Japan’s economy is improving.”

That statement has been unchanged since the Cabinet Office revised
up its view for the second consecutive month in a row in October last
year.

Other details from the May data follow:

The leading composite index, which measures the state of the
economy three months ahead: June 98.9 (+0.3 point) vs. May 98.6 (revised
-3.1 points). It posted the first m/m rise in three months. In April the
index showed the first drop in 14 months.

The lagging CI, which reflects economic conditions three months
ago: June 83.4 (unchanged) vs. May 83.4 (+0.5 point).

The diffusion index (DI) of coincident indicators: June 44.4 vs.
May 90.0. The coincident DI fell below the key 50 level for the first
time in 14 months. In May 2009 it rose above the threshold for the first
time in 15 months.

A reading above 50 points indicates an economic expansion, while a
reading below 50 indicates contraction.

The diffusion index of leading indicators: June 30.0 vs. May 54.5.
The index fell below 50 for the first time in 15 months. In April 2009,
it rose above the key level for the first time in 23 months.

The lagging DI: June 25.0 vs. May 40.0.

The composite index has replaced the diffusion index as a prime
indicator for business conditions.

The DI simply shows which way the economy is headed while the CI
also indicates how strong the changes in business conditions have been
or will be.

To signal a clear change in business cycles, the coincident
composite index’s seven-month moving average must show a cumulative
shift in the opposite direction by at least a full standard deviation in
the past month or three months (by at least 0.52 point), according to
the Cabinet Office’s criteria.

And to signal an improvement, the coincident CI’s three-month
moving average must show a cumulative shift in the opposite direction by
at least a full standard deviation in the past month or three months (by
at least 0.60 point).

In October 2009, the three-month moving average for the coincident
CI rose by 1.43 points from September after the seven-month moving
average of the coincident CI gained 1.14 points in September from
August, both clearing the hurdles.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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