/www.bloomberg.com/ By Lily Nonomiya
Tokyo, March 7 (Bloomberg) -- Japan's index of leading economic indicators signaled a contraction for the first time since October, suggesting that the economy may slide back into recession later this year.
The index, which includes job offers, machinery orders and other measures of future activity, was at 44.4 percent in January, compared with 63.6 percent in December, the Cabinet Office said. A reading above 50 signals economic growth in about six months, and a lower reading points to a contraction.
Report came as the Nikkei 225 Index tumbled to a 20-year low on concern that exports by companies such as Honda Motor Co. would be hurt by a possible war in Iraq. Exports accounted for half of last quarter's 0.5 percent growth in the world's second- biggest economy.
``The Iraq situation doesn't make the outlook so bright,'' said Azusa Kato, an economist at BNP Paribas Securities. ``There's nothing in the economy that suggests growth.''
Overall household spending in January fell 1.5 percent from a year earlier, another report today showed. From December, spending rose 2.8 percent, seasonally adjusted, the first gain in four months. Domestic demand accounts for about 55 percent of the world's No. 2 economy.
The No. 247 bond, which carries a 0.8 percent coupon and matures in 2013, rose 0.14 to 100.465 at 2:54 p.m. in Tokyo. Its yield fell 1.5 basis points to 0.75 percent. A basis point is 0.01 percentage point.
The coincident index, which tracks factory production, power use by large manufacturers and department store sales to measure current economic performance, was at 88.9 percent, compared with 44 percent in December, today's report showed.
The percentages are derived by dividing the number of positive components by all available components.