January: The Recession Indicator marks 94.0%

－ The Leading Index is at its lowest level in about two years

Takashi MIYAZAKI

  Senior Economist

2023/03/09

  The Recession Indicator for Japan in January 2023 released by the Japan Center for Economic Research (JCER) marks 94.0% (Figure 1). Based on the Leading Index, this probability indicates the likelihood of entering a recession in the months ahead. In January, the Leading Index which tends to sensitively reflects trends in the manufacturing sector declined for three consecutive months due to deteriorations in inventory ratios of producer goods for mining and manufacturing and of final demand goods, and others. Although service sector is on the road to recovery due to the normalization of economic activity and the easing of border control measures, exports and production in manufacturing sector are on the downside due to the impact of supply constraints that have been delayed in their elimination and of the Spring Festival in China, the probability is largely above the warning level of 67% for a recession.

【Figure 1. The Recession Indicator (January 2023)】

【Table 1. The Recession Indicator and the Leading Index (over the last year)】

  * The estimation method of the Recession Indicator has revised since the release in July 2020. Please refer to here for more details.