Japan's economy in contraction phase, faces headwinds: gov't report

Japan's leading economic index dropped in February for the fourth straight month and to the lowest level in four years in a sign that the world's third-largest economy will be facing more headwinds, the government said Wednesday.

According to the Cabinet Office, the index of leading indicators, which predicts future economic activity, dropped 2.0 points from a month earlier to 99.8 in February, with the figure in line with median analysts' expectations, although the lowest reading since December 2012, when the index read 98.9.

In addition, the preliminary report, showed the index of coincident indicators, such as industrial output, retail sales and new job offers, retreated 3.2 points in the recording period from the previous month to 110.3 against the 2010 base of 100.

The government's preliminary assessment of the coincident index was that business conditions here are "weakening" in a view maintained from its revised view in January that stated the same, with the data revealing the economy is experiencing a phase of contraction.

The lagging index, meanwhile, which measures economic performance in the recent past, was steady at 114.8, also in line with median expectations.

The indexes are used to identify the volume of overall business activities by composing percentage changes of selected indicators, while diffusion indexes are used to determine turning points of the business cycle.

According to the Cabinet Office's own interpretation of the coincident index, as it is decreasing, the economy "is in a contraction phase." Endit