— Adds Context In Paragraphs 2-4
— Japan Mar Prelim Leading CI +4.4 Pt M/M, Up 13 Months In Row
— Cabinet Office Repeats: CI Shows Japan Economy Improving

TOKYO (MNI) – Japan’s coincident composite index (CI), which
reflects current business conditions, posted its 12th straight
month-on-month rise in March, up 1.1 points at 101.1, after rising 0.2
point to 100.0 in February, the Cabinet Office said on Wednesday.

Both the coincident and leading indexes have now recovered to their
levels seen before the global financial crisis was triggered by the
collapse of the U.S. investment bank Lehman Brothers in September 2008.

The coincident CI hit the highest level since 102.2 marked in July
2008. In September that year, the index fell to 98.2 from 99.1 in August
and slumped to the recent low of 83.6 in March 2009, when the Japanese
economy hit bottom amid the global recession.

Meanwhile, the leading CI surged to 102.8, the highest reading
since August 2006, when it was also at 102.8.

The composite indexes were 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.”

Other details from the data follow.

The leading CI, which measures the state of the economy three
months ahead: Mar 102.8 (+4.4 points m/m) vs. Feb 98.4 (+1.2 points
m/m), up for the 13th straight month after posting the first gain in six
months in March 2009.

The lagging CI, which reflects economic conditions three months
before: Mar 85.4 (+1.2 points m/m) vs. Feb 84.2 (+0.4 point m/m).

The diffusion index (DI) of coincident indicators: Mar 100.0 vs.
Feb 100.0. It was at the top of the 0 to 100 scale for the third
consecutive month, recovering significantly after staying at the bottom
of the scale for seven straight months through March 2009.

The coincident DI was above the key 50 level for the 11th straight
month. In May 2009 it rose above it for the first time in 15 months.

A reading above 50 points indicates an economic expansion over the
next six months, while a reading below 50 suggests a contraction.

The diffusion index of leading indicators, which measures the state
of the economy three months ahead: Mar 100.0 vs. Feb 90.9. In May 2009,
it popped above 50 for the first time in 23 months and has stayed above
the key level.

The lagging DI, which reflects economic conditions three months
before: Mar 100.0 vs. Feb 60.0.

In October 2009, all of the three diffusion indexes hit the highest
level on the scale simultaneously for the first time since 1980, when
the government adopted the current data calculation formula.

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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