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The Conference Board reports today that the leading index for Japan increased 0.4 percent and the coincident index increased 0.6 percent in January.

  • The leading index increased for the ninth consecutive month in January. In addition, there were large upward revisions to previous months because of data revisions and as actual data became available. As a result, the leading index now increased at an almost 9.0 percent annual rate from its most recent low in April, and this strength continues to be widespread.
  • The coincident index increased significantly again in January 2004, and because of upward revisions it has now increased at a 4.5 percent annual rate from its most recent low in August 2003. The pick up in the coincident index is now consistent with real GDP, which increased at a 2.9 percent annual rate in the first half of 2003 and a 4.8 percent rate in the second half. The widespread strength in the leading index through January 2004 is signaling a continuation of strong economic growth through the first half of the year.

LEADING INDICATORS. Seven of the ten components that make up the leading index increased in January. The positive contributors to the index – in order from the largest positive contributor to the smallest – include index of overtime worked, stock prices, dwelling units started, real money supply, new orders for machinery and construction*, the Tankan business conditions survey, and real operating profits*. The (inverted) business failures, six month growth rate of labor productivity, and yield spread declined in January.

With an increase of 0.4 percent in January, the leading index now stands at 96.8 (1990=100). Based on revised data, this index increased 0.5 percent in December and increased 0.9 percent in November. During the six-month span through January, the index increased 4.2 percent, and all ten components advanced (diffusion index, six-month span equals 100.0 percent).

COINCIDENT INDICATORS. Five of the six components that make up the coincident index increased in January. The positive contributors to the index – in order from the largest positive contributor to the smallest – include industrial production, real retail sales, real manufacturing sales*, number of employed persons, and wage and salary income*. Real wholesale sales decreased in January.

With a 0.6 percent increase in January, the coincident index now stands at 103.1 (1990=100). Based on revised data, this index increased 0.4 percent in December and decreased 0.3 percent in November. During the six-month span through January, the index increased 1.5 percent, and four of the six components advanced (diffusion index, six-month span equals 66.7 percent).

The next release of the Japan Composite Indexes is scheduled for April 8, 2004 at 9:00 P.M. (ET) In Japan –April 9, 2004 at 10:00 A.M. (JST)

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in this release are those available “as of” 5:00 P.M. ET March 8, 2004. Some series are estimated as noted below.

Notes: The series in the leading index that are based on The Conference Board estimates are real operating profits and new orders for machinery. The series in the coincident index that are based on The Conference Board estimates are real manufacturing sales and wage and salary income.

Professional Contacts at The Conference Board:
Indicator Program: 1-212-339-0336

Media Contacts:
Randy Poe: 1-212-339-0234
Frank Tortorici: 1-212-339-0231


THE CYCLICAL INDICATOR APPROACH. The composite indexes are the key elements in an analytic system designed to signal peaks and troughs in the business cycle. The leading and coincident indexes are essentially composite averages of between four and ten individual leading or coincident indicators. (See page 3 for details.) They are constructed to summarize and reveal common turning point patterns in economic data in a clearer and more convincing manner than any individual component-primarily because they smooth out some of the volatility of individual components.

Historically, the cyclical turning points in the leading index have occurred before those in aggregate economic activity, while the cyclical turning points in the coincident index have occurred at about the same time as those in aggregate economic activity.

Further explanations of the cyclical indicator approach and the composite index methodology appear in The Conference Board's Business Cycle Indicators report and Web

Japan Composite Indexes: Components and Standardization Factors
 Leading IndexFactor
1Operating Profits0.0509
2Dwelling Units Started0.0423
3Business Failures0.0403
4Index of Overtime Worked0.0689
5Stock Prices (TOPIX)0.0312
6Six Month Growth Rate of Labor Productivity0.1047
7Tankan Business Conditions Survey0.0575
8Money Supply0.1914
9Yield Spread0.3798
10New Orders for Machinery and Construction0.0330
Coincident Index
1Number of Employed Persons0.4580
2Industrial Production0.0950
3Real Retail sales0.0510
4Real Manufacturing Sales0.1400
5Real Wholesale Sales0.0600
6Wage and Salary Income0.1960

Notes: The component factors are inversely related to the standard deviation of the month-to-month changes in each component. They are used to equalize the volatility of the contribution from each component and are "normalized" to sum to 1. These factors were last revised effective with the December 13, 2001 release, and all historical values for the two composite indexes were revised at that time to reflect the changes. (Under normal circumstances, updates to the leading and coincident indexes only incorporate revisions to data over the past six months.)

The factors above for the leading index were calculated using the June 1974 to December 2000 period as the sample period for measuring volatility. Separate sets of factors for the June 1974 to December 2000 period, the April 974 to May 1974 period, the February 1970 to March 1974 period, and February 1965 to January 1970 period, are available upon request. The factors above for the coincident index were calculated using the February 1997 to December 2000 period as the sample period. Separate sets of factors for the January 1997, the February 1970 to December 1996 period, and the February 1965 to January 1970 period are available upon request. These multiple sample periods are the result of different starting dates for the component data. When one or more components is missing, the other factors are adjusted proportionately to ensure that the total continues to sum to 1. For additional information on the standardization factors and the index methodology visit our Web site:

To address the problem of lags in available data, those leading and coincident indicators that are not available at the time of publication are estimated using statistical imputation. An autoregressive model is used to estimate each component. The resulting indexes are constructed using real and estimated data, and will be revised as the data unavailable at the time of publication become available. Such revisions are part of the monthly data revisions, now a regular part of the U.S. Business Cycle Indicators program. The main advantage of this procedure is to utilize in the leading index the data such as bond yields and stock prices that are available sooner than other data on real aspects of the economy such as sales and operating profits. Empirical research by The Conference Board suggests there are real gains in adopting this procedure to make all the indicator series as up-to-date as possible.


The 2004 schedule for "Japan Leading Economic Indicators" news releases is:

February 2004 Data ... Thursday, April 8, 2004

March 2004 Data ... Thursday, May 6, 2004

April 2004 Data ... Wednesday, June 9, 2004

All releases are at 9:00 P.M. ET and 10:00 A.M. JST (following day)

ABOUT THE CONFERENCE BOARD. Founded in 1916, The Conference Board is the premier business membership and research network. The Conference Board has become a global leader in helping executives build strong professional relationships, expand their business knowledge and find solutions to a wide range of business challenges. The Board's Economics Program, under the direction of Chief Economist Gail Fosler, is a recognized source of forecasts, economic analysis and objective indicators such as the Leading Economic Indicators and the Consumer Confidence Index.

This role is part of a long tradition of research and education that stretches back to the compilation of the first continuous measure of the cost of living in the United States in 1919. In 1995, The Conference Board assumed responsibility for computing the composite indexes from the U.S. Department of Commerce. The Conference Board now produces business cycle indexes for the U.S., Australia, France, Germany, Korea, Japan, Mexico, Spain and the U.K. To subscribe to any of these indexes, please visit, contact the customer services at 212-339-0345, or email


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