Business Cycles in Japan and in Asian Countries : Tests of Comovements between CI and Trade Statistics

In this paper, we analyse the business cycle comovement among Asian countries and between them and Japan. The correlation statistics of quarterly GDP data confirm that the relationship among Asian countries and between these countries and Japan has been increasing since the 1997 Asian currency crisis. We then examine the similar comovement between Asian countries and Japan by observing the monthly CI (composite index) of business conditions and trade data on exports and imports. The results confirm a certain level of correlation when analyzing both aggregate imports and exports and imports and exports of individual goods. An important factor behind this correlation of trade with Asian countries and Japan may be a system of international fragmentation centered around process specialization between countries. The results of the verification conducted in this paper confirm a tendency for imports of goods qualified as intermediate goods from Asia to be a leading indicator of Japanese business conditions and suggest the possibility that trends in imports from Asia may be important information in forecasting domestic economic performance in Japan.