Japanese Leading Economic Index declined in June

The Japanese Leading Economic Index (LEI) decreased in June by 0.5%, while the Coincident Economic Index also fell 0.5%, says the Conference Board. June was the fourth successive month of LEI decline in Japan.

The largest negative contributors to the LEI were business failures, the index of overtime worked and the 6-month growth rate of labor productivity.

Including June’s fall, the LEI has declined by -2.2% during the first six months of 2014 (equivalent to approximately -4.3% annually), compared to a +3% increase during the second half of 2013.

Below is a list of the ten components that make up the LEI, and how they contributed to the total in June:

  • new orders for machinery and construction (positive),
  • the Tankan business conditions survey (positive),
  • the interest rate spread (positive),
  • dwelling units started (positive),
  • real operating profits (positive),
  • business failures (negative),
  • the six-month growth rate of labor productivity (negative),
  • the index of overtime worked (negative),
  • real money supply (unchanged).

After falling -0.5% in June, the Conference Board LEI for now stands at 99.0. The LEI declined in May and April by -1.1% and -0.1% respectively. Japan’s LEI had also fallen in March.

According to the Conference Board, the weaknesses among the LEI “have become very widespread.”

Japanese Leading Economic Index

(Data source: The Conference Board)

Coincident Economic Index

The CEI, which measures economic activity, also declined in June. All the CEI components fell except for employment. During the first six months of this year, the CEI dropped by -1% (equivalent to about -2% annually).

Below is a breakdown of the four CEI components and how they contributed in June:

  • industrial production (negative),
  • wage and salary income (negative),
  • retail, wholesale and manufacturing (negative),
  • employed persons (unchanged).

Including June’s -0.5% decrease, the Conference Board CEI for Japan now stands at 95.7. In May and April it rose by +0.3% and fell by -1.5% respectively.

Japan increased sanctions against Russia

Japan has imposed new sanctions against Russia, despite its desire to keep a diplomatic door open with the country. Prime Minister Shinzo Abe was torn between complying with his major ally’s policy and making sure President Vladimir Putin’s visit in the fall still goes ahead.

Japan has been trying to improve relations with Moscow, partly to make sure it does not lose out on the country’s abundant natural gas.

Japan says it will freeze assets belonging to two organizations as well as 40 people connected with Russia’s meddling in Ukraine. Imports made in Crimea will also be restricted.

According to figures published by Japan’s Cabinet Office on August 13, Q2 GDP contracted sharply.