A key gauge of the current state of the economy slid below the boom-or-bust line of 50 percent for March for the first time in 11 months, but the government said Tuesday the outlook is not negative.
The index of coincident economic indicators came to 38.9 percent, down from a revised 70 percent in February, the Cabinet Office said in a preliminary report.
A reading above 50 percent is considered a sign of economic expansion, while a figure below that is viewed as a sign of contraction.
Despite the sharp fall, a Cabinet Office official said it is the "movement of a single month," and the figure could be around 50 percent following revisions with indicators not available for the preliminary calculations.
Besides, the coincident index is likely to be above 50 percent in April as the government projects that industrial production will expand 4.6 percent, the official said.
As a result, the government did not change its assessment that coincident indicators are improving.
Meanwhile, the index of leading indicators, predicting economic developments about six months ahead, was 80 percent, a touch lower than the revised 81.8 percent in February and above the 50 percent line for the seventh straight month.
The index of lagging indicators, designed to measure economic performance in the recent past, was also 80 percent, up from a revised 66.7 percent and staying above the 50 percent threshold for the seventh month in a row.
The diffusion indexes compare the levels of various economic data for a reporting month with levels three months earlier.
The government attributed the plunge of the March coincident index mainly to special factors in the reporting month.