The government's key gauge for the current state of the domestic economy stayed above the boom-or-bust line of 50 percent in February for the second month in a row.
The index of coincident economic indicators stood at 77.8 percent, down from the 90 percent logged in January, the Cabinet Office said Monday in a preliminary report.
The government believes the economy is still flat, according to Yoshihiko Senoo, director of the business statistics department at the Cabinet Office's Economic and Social Research Institute.
"The coincident index has followed a zigzag course since October," Senoo said. "We have not yet seen a clear direction in the index."
A reading above 50 percent is viewed as a sign of economic expansion, while a figure below that line is considered a sign of contraction.
The index of leading indicators, measuring economic movements about six months down the road, stood at 55.6 percent, down from 60 percent in January but above 50 percent for the fourth straight month. The government expects the coincident index to stay above 50 percent in March, in light of the 2.8 percent increase in industrial production and the improved consumption and employment conditions forecast for the month, Senoo said.
He added, however, the government will monitor leading indicator developments carefully amid concern over weak movements in several areas.
"We need to watch factors related to the index carefully," he said. "Weak figures in financial issues also cast a shadow in the index."
The index of lagging indicators, designed to gauge economic performance in the recent past, stood at 100 percent, up from the 33.3 percent recorded in January.
Senoo said the rise was chiefly attributable to the improved employment situation and other structural factors rather than to a substantial change in consumer sentiment.
The diffusion indexes compare current economic data with their levels three months earlier.