Leading Index MoM

The Japan Leading Index MoM is the month-on-month percent change in The Conference Board Leading Economic Index for Japan. The publisher is The Conference Board, a nonprofit think tank founded in 1916. History starts in 1965 and the base is 2016=100, which shifts levels only. The index blends 10 forward-looking Japan series with a 4-series coincident index.

The coincident index tracks current conditions with real GDP. The leading index anticipates turns by around 4 months. It does not measure output or stocks alone, since TOPIX is one of 10 parts.

It is not the Cabinet Office index, which uses different parts and base. It is not a one-sample survey, though Tankan sentiment comes from a quarterly survey.

Releases arrive monthly, about 6 weeks after the reference month. Data are available as of 5:00 PM ET days before publication. Release is 10:30 AM ET under Business Cycle Indicators, with the next date pre-announced.

Each release shows levels with monthly and 6-month changes and diffusion spans. It shows contributions marked preliminary or revised, with charts and links. Monthly updates revise only the prior 6 months.

Benchmarks recompute history and may reset the base, breaking comparability. A rise signals improvement and a fall signals decline, confirmed by 6-month change with breadth. No fixed trigger exists, and 100 is not a line.

Weights below are the 2009 vintage example, not permanent constants, with factors summing to 1 and falling as volatility rises.

• Liquidity, 27%: Real Money Supply, M2 plus CD, the largest share.
• Rate expectations, 15.9%: Yield Spread of 10-year bonds minus the overnight rate, in percent form.
• Work intensity, 22.93%: Overtime Worked with Productivity growth, the latter percent-form and 3-month smoothed.
• Profits and sentiment, 16.02%: Real Operating Profits with Tankan Conditions for all enterprises and industries. Both are quarterly and monthly spread, profits estimated in real time.
• Markets and investment, 8.86%: TOPIX with New Orders for Machinery and Construction, 3-month smoothed and estimated in real time.
• Housing and failures, 9.29%: Dwelling Units Started with Suspension of Transactions. Both use 3-month smoothing, and falls in suspensions add positively as an inverted series.

In August 2009, reported October 9, 2009, it rose 2.9% to 84.1 (2004=100), the sixth straight gain. Six-month growth was 18.1% with 39.5% annualized, the best since 1965. Nine of 10 parts rose on productivity, overtime, and profits, while dwellings lagged. Diffusion hit 70.0%.

The coincident index rose 0.3% to 94.5, with 6-month change at 1.3%. Real GDP grew 2.3% annualized in Q2, first gain in a year after a 12.4% Q1 fall. The publisher saw modest continued improvement.

1. Monthly change: Percent-form parts use simple difference, others symmetric change of 200 times gap over sum. M2 99 to 100 gives 200 times 1 over 199, or 1.005%.
2. Weighting: Each change times its factor gives a contribution. Missing parts rescale the rest to 1. That M2 move times 0.27 gives about 0.271%.
3. Total and trend: Contributions sum to S. Japan lists trend factors for 1992 to 2007 and 1965 to 1991 without placement. Suppose S is 0.5.
4. Level and base: Build from 100 as prior times 200 plus S over 200 minus S. S at 0.5 with prior 90.0 gives 90.451, or 0.5% before rounding. Then divide by base-year mean for 2016=100.
5. Smoothing and gaps: No seasonal step exists at index level. Agencies adjust suitable series. Several inputs use 3-month averages, and quarterly parts are interpolated. Gaps use autoregressive estimates until actuals arrive.
6. Breadth: Gains above 0.05% score 1.0 and flat moves score 0.5. Drops above 0.05% score 0.0. The mean times 100 over the part count gives 1-month and 6-month views.
7. Month change and rounding: Published change compares the rebased index with the prior month. Six-month moves carry annualized rates. Totals can differ from summed parts on rounding and base effects.