Index prompts economists to believe expansion has peaked

A weak economic index prompted economists Tuesday to say Japan's economic expansion has peaked.

The Cabinet Office said October's index of coincident economic indicators, a key gauge of the current state of the economy, stood at 11.1 percent, staying below the boom-or-bust line of 50 percent for three straight months.

"If the index remains below 50 percent for the coming months, the Cabinet Office could conclude next summer that a cyclical peak came before December," a Cabinet Office official said.

Yuji Shimanaka, manager of UFJ Institute's investment research department, said, "The peak could have come last June."

Naoki Iizuka, chief economist at Dai-Ichi Life Research Institute, agreed. "The Japanese economy is now at the border between a slowdown and a recession."

If June was the peak, the latest economic expansion could have been limited to 29 months.

But Kiichi Murashima, an economist at Nikko Citigroup Ltd., predicted the economy may resume a moderate recovery in the January-March quarter next year.

A reading of the coincident indicator above 50 percent is considered a sign of economic expansion. A figure below that line is seen as a sign of contraction.

It is the first time for the index of coincident economic indicators to remain below 50 percent for the third successive month since December 2001 through February 2002.

Of the 11 indicators used to calculate the coincident index, nine were available for the preliminary report and only one -- the ratio of job offers to seekers -- showed a positive reading.