— Japan May Leading CI Revised To -3.1 Pt, 2nd M/M Drop In Row
— Cabinet Office Repeats: CI Shows Japan Economy Improving

TOKYO (MNI) – Japan’s coincident composite index (CI), which
reflects current business conditions, fell an unrevised 0.1 point to
101.2 in May, posting the first drop in 14 months after a 0.8 point rise
to 101.3 in April, the Cabinet Office said on Tuesday.

The decline in the index was led by drops in producers’ investment
goods shipments (excluding transport equipment), commercial sales at
both retail and wholesale levels as well as large industrial power
consumption.

May industrial output was revised up to +0.1% m/m from a
preliminary -0.1% but didn’t lead to a change in the level of the
coincident index.

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

In reporting preliminary May data on July 6, 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.”

Other details from the May data follow:

The leading composite index, which measures the state of the
economy three months ahead: May revised down slightly to 98.6 (-3.1
points) from 98.7 (-3.0 points) vs. April 101.7 (-0.2 point). It was the
second straight m/m drop after showing the first drop in 14 months in
April.

The lagging CI, which reflects economic conditions three months
ago: May revised down to 83.4 (+0.5 point) from 83.6 (+0.7 point) vs.
April 82.9 (-1.9 points), showing the first rise in two months.

The diffusion index (DI) of coincident indicators: May revised to
90.0 from 88.9 vs. April 95.0. The coincident DI was above the key 50
level for the 13th straight month. 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: May revised to 54.5 from
55.0 vs. April 90.9. In May 2009. The index stayed above 50 for the 14th
straight month. In April 2009, it rose above the key level for the first
time in 23 months.

The lagging DI: May revised to 40.0 from 50.0 vs. April 20.0.

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 0.59 point, revised from
last year’s 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 0.68 point, revised from 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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