A New Index to Capture Business Conditions (Coincident Index)

• Published in: THE KEIZAI BUNSEKI (THE ECONOMIC ANALYSIS) Vol. 208; pp. 50 - 76
• Main Authors: INO, Yasuhisa, KUWAHARA, Susumu
• Format: Journal Article
• Language: Japanese
• Published: The Economic and Social Research Institute, Cabinet Office 25.10.2023; 内閣府経済社会総合研究所
• Subjects: aggregate volume; C82; coincidence index; common fluctuations; E01; E32; equivalence of three approaches; indexes of business conditions; the Committee for Business Cycle Indicators; 一致指数; 三面等価; 共通変動; 景気動向指数; 景気動向指数研究会; 総体量
• ISSN: 0453-4727; 2758-9900
• DOI: 10.60294/keizaibunseki.208.0_50

The basic structure of the Indexes of Business Conditions, which have been published monthly since August 1960, has been maintained to this day. However, the environment surrounding the Japanese economy has changed, and the need for a fundamental review has been pointed out. In July 2022, the Economic and Social Research Institute, Cabinet Office, Government of Japan released a new index to capture business conditions (coincident index) (the new coincident index) as the result of a back-to-basics study on the ideal form of business condition indexes. The new coincident index was developed by rethinking the conventional way of understanding the economy, which assumes common fluctuations across the economy, and, instead, focusing on fluctuations in the aggregate volume of economic activity, reflecting the decoupling between the movement of goods and services as the economy has become more service-oriented and software-oriented. The basic approach is to combine a wide range of indicators, to capture the three aspects of production, dis-tribution, and spending, and to capture the autonomous economic activities of the private sector. The new coincident index fluctuates in the same direction as the current Indexes of Business Conditions (coincident index), but its amplitude is slightly smaller and its movements are more similar to those of real GDP than those of the current Indexes of Business Conditions (coincident index). Whether or not the new coincident index can be used as an appropriate indicator of the economy should be thoroughly examined as more data are accumulated in the future.