— Japan Sep Prelim Leading CI -0.6 Pt M/M, 3rd Drop In Row
— Cabinet Office Repeats: CI Shows Japan Economy Improving
— Japan Cabinet Office: But CI Shows Move Toward Pausing

TOKYO (MNI) – Japan’s coincident composite index (CI), which
reflects current business conditions, fell a preliminary 1.3 points to
102.0 in August, posting the first monthly drop in 19 months, the
Cabinet Office said on Monday.

It followed a 0.3 point rise to 103.3 in August.

The drop in the index in September was led by decreases in overtime
hours worked in the manufacturing sector, producers’ shipments and
retail sales among other items.

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

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

But it also noted that the three-month moving average of the
coincident CI fell 0.13 point in September m/m, posting the first drop
in 17 months, which “indicates a move toward a pause” in the current
modest economic recovery.

Other details from the latest data follow:

The leading composite index, which measures the state of the
economy three months ahead: September 98.9 (-0.6 point m/m) vs. August
99.5 (-0.5 point), the third straight m/m drop. In May the index showed
the first drop in 15 months, followed by a rise in June.

The lagging CI, which reflects economic conditions three months
ago: September 88.4 (+1.0 point m/m) vs. August 87.4 (-0.1 point),
marking the first m/m rise in two months.

The diffusion index (DI) of coincident indicators: September 55.6
vs. August 70.0, staying at or above the key 50 level for the 17th
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: September 30.0 vs.
August 45.5. In June 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: September 75.0 vs. August 80.0.

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).

tokyo@marketnews.com
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