TOKYO, Aug 5: Japan’s key index of future economic activity remained above the 50 point boom-or-bust line for the sixth straight month in June, but rising stockpiles and weak financial markets may slow recovery, the government said on Monday.

The leading index of economic activity for the next three to six months stood at 70.0 points, against a revised 90.9 in May, the Cabinet Office’s economic and social research institute said.

The 50-point mark is regarded as the dividing line between growth and contraction in the economy.

There were an increasing number of poorly performing indices for June, especially corporate inventory-related indices, which showed increases on a month-on-month basis which will send the leading index lower, a cabinet office official warned.

Stockpiles were rising for construction materials, small passenger cars, as well as chemical and electronics products, the official said. Financial markets were also performing poorly with the Tokyo stock index down 18.1 per cent from the previous year.

There is a high probability the July leading index will fall below the 70.0 points seen in June. However, (it) will remain above the 50 point threshold, he said.

Japan’s leading index is based on a raft of financial figures which offer a pointer to the direction of the world’s second biggest economy, such as commodity indices, new car registrations and the number of new home building projects.

The coincident index measuring the current state of the economy came to 77.8 points in June, after reaching 100.0 points in May, rising above the 50-point level for the fifth straight month.

The coincident index is improving and there is a possibility the economic cycle has changed (for the better) but we need to watch carefully that current strong output-related indices are helped by robust exports, the official said.

We must be cautious over whether developments in domestic demand and overseas economies will affect Japan’s exports, and the July and August outlook for industrial output-related leading and coincident indices, he said. —AFP