TOKYO, Feb 5: Japan’s forward looking index of economic activity for December was positive for the second straight month, suggesting the economy will expand slowly, official data showed on Wednesday.

The leading index for the next three to six months stood at 60 points, down from a revised 63.6 in November, 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.

Japan’s leading index is based on a raft of figures such as commodity indices, new car registrations and the number of new home building projects.

“Durable goods sales showed a second month of gains on a monthly basis, though this is mainly as a result of good exports of automobiles and motorcycles,” a government official said, adding this did not reflect domestic demand.

“The trend in the December leading index does not show a change from the prior month. Overall, the index has been moving around the 50-point threshold.”

Economists said the reading showed Japan’s business cycle may not have peaked.

“December indices confirmed economic weakness at the end of last year, but also suggested the economy could expand going forward. Notably, leading indicators showed greater deterioration in market sentiment than in the real economy,” said Barclays Capital chief economist Mamoru Yamazaki.

“In this context, it would be too early to say the business cycle has already peaked,” he noted.

But JP Morgan economist Ryo Hino cautioned the figures “nonetheless point to further downside risks for the near term economic outlook”.

The coincident index measuring the current state of the economy was at 44.4 points, against a revised 30 in November.—AFP