Japan Coincident Indicator Pointing to Recession

Japan's leading indicator posted a modest gain in June but remains well below the highs set back in January of this year (chart 1). Interestingly though, it's the less followed coincident indicator that gives us pause. Indeed, the six month rate of change in the coincident indicator dipped into negative territory for the first time since the recession in 2012, a condition that has preceded recessions in all but two cases over the last 25 years (chart 2). Furthermore, the six month rate of change in the OECD leading indicator is also an its lowest point since the 2008-2009 recession and portends further drops in the coincident indicator in the months to come.