The leading index for Japan increased 0.2 percent and the coincident index increased 0.1 percent in October.

• The Leading Index bounced back in October after two consecutive monthly declines. This month's increase was primarily due to a decrease in business failures and an increase in the money supply. With this latest increase, the index has recovered all of its losses from the previous year and is up 4.7 percent this year.
• The Coincident Index also turned up in the latest month, rising 0.1 percent from September. Over the past few months, the severity of the downward trend has been moderating, with a sharp increase in real wholesale sales as the primary reason for the gain in October.

LEADING INDICATORS. Five of the ten components that make up the leading index increased in October. The positive contributors to the index - from the largest positive contributor to the smallest - are business failures, real money supply, dwelling units started, new orders for machinery and construction, and the Tankan business conditions survey. Five components decreased in October. The negative contributors to the index - in order from the largest negative contributor to the smallest - are the stock price index, yield spread, index of overtime worked in manufacturing, real operating profits*, and six month growth rate of labor productivity*.

The leading index now stands at 91.3 (1990=100). Based on revised data, this index decreased 0.1 percent in September and decreased 0.2 percent in August. During the six-month span through October, the index increased 2.1percent, and six of the ten components advanced (diffusion index, six-month span equals 60.0 percent).

* See Notes under Data Availability.

The next release of the Japan Composite Indexes is scheduled for January 8, 2003 at 8:00 P.M. (ET)
In Japan - January 9, 2003 at 10:00 A.M. (JST)

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

With the increase of 0.1 percent in October, the coincident index now stands at 101.4 (1990=100). Based on revised data, this index decreased 0.1 percent in September and increased 0.3 percent in August. During the six-month span through October, the index increased 0.3 percent, and two of the six components advanced (diffusion index, six-month span equals 33.3percent).

FOR TABLES AND CHARTS, SEE BELOW

DATA AVAILABILITY. The data series used to compute the two composite indexes reported in this release are those available "as of" 10:00 A.M. ET December 11, 2002. 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 the six-month growth rate of labor productivity. 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:
Michael Fort: 1-212-339-0402
Ataman Ozyildirim: 1-212-339-0399

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

Website: http://www.globalindicators.org E-mail: indicators@conference-board.org

Further explanations of the cyclical indicator approach and the composite index methodology appear in The Conference Board's Business Cycle Indicators report and Web site:www.globalindicators.org.

* See Notes under Data Availability.

Japan Composite Indexes: Components and Standardization Factors

	Leading Index	Factor
1	Operating Profits	0.0509
2	Dwelling Units Started	0.0423
3	Business Failures	0.0403
4	Index of Overtime Worked	0.0689
5	Stock Prices (TOPIX)	0.0312
6	Six Month Growth Rate of Labor Productivity	0.1047
7	Tankan Business Conditions Survey	0.0575
8	Money Supply	0.1914
9	Yield Spread	0.3798
10	New Orders for Machinery and Construction	0.0330

Coincident Index

1	Number of Employed Persons	0.4580
2	Industrial Production	0.0950
3	Real Retail sales	0.0510
4	Real Manufacturing Sales	0.1400
5	Real Wholesale Sales	0.0600
6	Wage and Salary Income	0.1960

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: www.globalindicators.org.

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.

NOTICES

The 2003 schedule for "Japan Leading Economic Indicators" news releases is:

November 2002 Data ... Wednesday, January 8, 2003

The 2003 release schedule will be announced in the January release

All releases are at 8:00 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 www.globalindicators.org, contact the Global Indicators Research Institute at 212-339-0312, or email indicators@conference-board.org.

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