Japan's economy in a recession likely

The composite index of coincident economic indicators for September declined for the sixth consecutive month, indicating the economy of Japan has probably entered a recession, according to the Cabinet Office.

The coincident CI, in which the current economic circumstances, amounted to 91.2 compared with 100 for the base year of 2005, the 2.3 points from the previous month, the Bureau said a preliminary report released Tuesday.

In addition to the declining exports as a result of a delay in the overseas economy, some indicators, such as industrial production and shipments of durable goods, dropped due to sluggish domestic auto sales after the end of a government subsidy program for the purchase of environmentally friendly vehicles.

The Cabinet Office revised down its basic assessment, say the national economy is in a recession phase has come and is probably in the early stages of an economic slowdown.

This was the first inspection necessary created since May 2011, just after the great Eastern Japan earthquake and tsunami.

Regarding the prospects for the future, the Cabinet Office said it will keep a close eye on one should the global economic downturn and the output.

Some market observers suspect that the domestic economy in a recession phase after peak in March.

Slow exports cast dark clouds

The Government must closely analyze different data before officially indicating that the economy has entered a recession. Dark clouds, however, are lurking.

"It's pretty hard to judge whether the country in an economic malaise has moved, as we must consider various indicators," said Seiji Maehara, State Minister for economic and fiscal policy.

The economy had expanded since the low point in March 2009.

For some economists, however, there is no doubt that the economy is in trouble.

"The current economic situation is clearly getting worse, it is not just stagnant," said Yoshiki Shinke, a senior economist of the Dai-Ichi life Research Institute. "I suspect that the national economy peaked in March this year."

This is the first time the CI has dropped for six straight months since a 10-month period of decline from June 2008 to March 2009, including the so-called Lehman shock in September 2008.

Declining exports caused by the global economic slowdown, sluggish domestic auto sales and the harmful effects of sour relations with China over the Senkaku Islands have exacerbated the situation.

The Government on Monday will be a preliminary report about the nation's seasonally adjusted real gross domestic product spend for the period July-September, where negative growth estimates are expected for the first time in the past five quarters. In addition, some observers believe negative GDP growth remains in the following October-December quarter.

The Government has not abandoned hope that the economy will recover as overseas economies along with the positive effects of the increased demand for the reconstruction of areas affected by the disaster in March 2011.

"There are signs that the Chinese economy has bottomed out, so that the Japanese economy is expected to recover in a relatively short time," said Yoko Takeda, senior economist at the Mitsubishi Research Institute, Inc.

However, the leading index--a measure of economic performance in the coming months fell 1.5 points to 91.7,--the first decline in two months.

As output lag to reasons such as ongoing tensions with China, will continue to cause further declines of the production, which can have adverse consequences for employment. --Hiroyuki Kato