— Japan Oct Prelim Leading CI -1.4 Pt M/M, 4th Drop In Row
— Cabinet Office Downgrades View: CI Shows Japan Econ Pausing

TOKYO (MNI) – Japan’s coincident composite index (CI), which
reflects current business conditions, fell a preliminary 1.4 points to
100.7 in October, posting the second monthly drop in a row, the Cabinet
Office said on Tuesday.

It followed a 1.2 point fall to 102.1 in September.

The drop in the index in October was led by seven out of 11
sub-indexes. The seven included electric power consumption by major
users, overtime hours worked in the manufacturing sector and sales of
small manufacturers.

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

The Cabinet Office downgraded its assessment based on the October
coincident CI, saying the index “shows Japan’s economy is pausing.”

To signal a “pause” in an economic cycle, 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 (that is, by at least 0.68 point).

In October alone, the three-month moving average fell 0.77 point
from September, large enough to prompt the government to revise down its
assessment.

In November, the Cabinet Office downgraded its overall assessment
based on the CI up to September, saying that the economy is still
“improving” but warned it “is moving toward a pause” given that the
three-month moving average of the coincident CI posted the first drop in
17 months.

Previously, it had said the economy is “improving” in October,
based on the CI up to August.

Other details from the latest data follow:

The leading composite index, which measures the state of the
economy three months ahead: October 97.2 (-1.4 point m/m) vs. September
98.6 (-0.9 point), posting the fourth straight m/m drop.

The lagging CI, which reflects economic conditions three months
ago: October 89.2 (+0.9 point m/m) vs. September 88.3 (+0.9 point),
marking the second straight m/m rise.

The diffusion index (DI) of coincident indicators: October 33.3 vs.
September 50.0, below the key 50 level for the first time in 18 months.

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

The diffusion index of leading indicators: October 20.0 vs.
September 36.4, staying below the key 50 level for five straight months.

The lagging DI: October 100.0 vs. September 60.0.

tokyo@marketnews.com
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