Monthly Economic ReportExecutive Summary( mar 2026 )
(Provisional translation)
(Assessment of the current state of the Japanese economy)
The Japanese economy is recovering at a moderate pace, while attention should be given to the effects caused from the situation in the Middle East.
- Private consumption shows movements of picking up.
- Business investment is picking up moderately.
- Exports are almost flat.
- Industrial production is flat.
- Corporate profits, while affected by the U.S. trade policies, show movements of improvement.
Firms' judgments on current business conditions have been almost flat. - The employment situation shows movements of improvement.
- Consumer prices have been rising moderately recently.
Concerning short-term prospects, the improvement in the employment and income situation and the effects of the policies are expected to support a moderate recovery, while attention should be given to the effects caused from the situation in the Middle East. Also, attention should be given to the effects of fluctuations in the financial and capital markets and situations in U.S. trade policies.
(Policy stance)
The Government will strive to build a “Strong Japanese Economy” through the strategic employment of fiscal policies embracing an approach of “responsible and proactive public finances”.
The Government will restore strength to the Japanese economy while tackling rising prices and safeguarding people's daily lives. To this end, the Government will promptly implement “Comprehensive Economic Measures to Build a “Strong Japanese Economy”” consisting of three pillars “Ensuring security in people’s daily lives: Measures to address rising prices”; “Strategic investments that enhance resilience against potential crises: Building a robust economy through growth-oriented investment”; and “Strengthening defense capability and diplomatic power” and the FY2025 supplementary budget, and will also work for early passage of the FY2026 budget and the related bills.
In response to the situation in the Middle East, in the near term, the Government carry out emergency measures to curb dramatic fluctuations in the price of fuel oil, and has also decided to begin releasing its national petroleum reserves with the intention of utilizing them.
The Government and the Bank of Japan will continue to work closely together to conduct flexible policy management in response to economic and price developments.
The Government expects the Bank of Japan to achieve the price stability target of two percent in a sustainable and stable manner, while confirming the virtuous cycle between wages and prices, by conducting appropriate monetary policy management in light of economic activity, prices and financial conditions.
Detailed explanations
1. Demand trends such as consumption and investment
Private consumption shows movements of picking up.
According to Quarterly Estimates of GDP for October-December 2025 (Second Preliminary Estimates), the real term of private consumption increased by 0.3% from the previous quarter. According to Consumption Trend Index (CTI), the real term of Total Consumption Trend Index (CTI macro) increased by 0.1% from the previous month in January.
As for each index, looking at the Consumption Trend Index (CTI), which comprises demand-side statistics, the real value of the Household Consumption Trend Index (CTI micro, total households) increased by 0.5% from the previous month in January. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value increased by 3.0% from the previous month in January.
Looking at the background of consumption trends, real wage income of employees is picking up moderately. Consumer confidence, which has been improving, shows weak movements.
Moreover, based on the interview results, new automobile sales are almost flat. Home appliance sales have been increasing moderately with a pause seen recently. Travel is almost flat. Eating-out is increasing moderately.
Based on these results, private consumption shows movements of picking up.
As for short-term prospects of consumption, the improvement in the employment and income situations is expected to support movements of picking up. However, attention should be given to the weak movements in consumer confidence.
Business investment is picking up moderately.
Business investment is picking up moderately. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey, including software investment) show that business investment increased in the October-December quarter of 2025 by 3.5% from the previous quarter. By industry, business investment decreased for manufacturers by 0.2% from the previous quarter and increased for non-manufacturers by 5.4%.
Capital Goods Shipments and Imports (excluding transport equipment), which comprise supply-side statistics on investment in machinery and equipment, are almost flat. Software investment is increasing.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (December survey) and the Business Outlook Survey (January-March survey), planned business investment for all industries in fiscal year 2025 is expected to increase. According to the Business Outlook Survey (January-March survey), planned business investment in fiscal year 2026 is expected to increase. According to the BOJ Tankan (December survey), DI for firms' judgment on production capacity was ±0 for manufacturers, showing that the sense of excessive capacity decreased by 1 point from the September survey (+1), while the DI was -3 for all industries, including non-manufacturers, showing that the sense of insufficient capacity increased by 1 point from the September survey (-2). The figures for Orders Received for Machinery, a leading indicator, show movements of picking up. The planned amount of construction is almost flat.
As for short-term prospects, business investment is expected to continue to be on a pickup trend, mainly reflecting steady corporate profits and actions for labor-saving investment.
Housing construction is in a weak tone.
Housing construction is in a weak tone. New construction starts of dwellings decreased by 0.1% from the previous month to 755,000 dwelling units (annualized) in January. By owner occupant relation, construction of owned houses, houses for rent, and houses for sale is in a weak tone. In addition, the total number of sales of condominiums in the Tokyo metropolitan area is almost flat.
As for short-term prospects, housing construction is expected to remain in a weak tone for the time being.
Public investment holds firm.
Public investment holds firm. The amount of public construction completed in January decreased by 0.0% from the previous month, the amount of contracted public works in February increased by 4.2% from the previous month, and the amount of public works orders received in January decreased by 30.9% from the previous month.
As for short-term prospects, public investment, partly due to the effect of the supplementary budget, is expected to show steady performance.
Exports are almost flat. Imports are almost flat. The balance of goods and services is in near equilibrium.
Exports are almost flat. By region, exports to Asia, the EU, and other regions are almost flat. Exports to the U.S. show movements of picking up. As for short-term prospects of exports, attention should be given to the risk of downward pressure due to the situation in the Middle East, and to the impact of trade issues.
Imports are almost flat. By region, imports from Asia, the U.S., and the EU are almost flat. Concerning short-term prospects of imports, attention should be given to the risk of downward pressure due to the situation in the Middle East.
The balance of goods and services is in near equilibrium.
The surplus in the balance of trade in January increased, as export values increased to a larger extent than import values. The balance of services is in deficit.
2. Corporate activities and employment
Industrial production is flat.
Industrial production is flat. The Indices of Industrial Production increased by 4.3% from the previous month in January. The Indices of Industrial Inventories decreased by 0.8% from the previous month in January. The Survey of Production Forecast in Manufacturing expects a decrease of 0.5% in February and a decrease of 2.6% in March.
By industry, transport equipment is flat. Production machinery is flat. Electronic parts and devices are picking up.
Concerning short-term prospects of production, attention should be given to the risk of downward pressure due to the situation in the Middle East.
Tertiary industry activity is increasing moderately.
Corporate profits, while affected by the U.S. trade policies, show movements of improvement. Firms’ judgments on current business conditions have been almost flat. The number of corporate bankruptcies appears to be increasing.
Corporate profits, while affected by the U.S. trade policies, show movements of improvement. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2025 increased by 4.7% from the previous year and increased by 1.6% from the previous quarter. By industry, manufacturers saw an increase of 0.9% in corporate profits from the previous year, and non-manufacturers saw an increase of 7.1%. By size of company, large and medium-sized companies saw an increase of 6.4% from the previous year, and small companies saw a decrease of 0.7%. According to the BOJ Tankan (December survey), in fiscal year 2025, sales are expected to increase by 2.4% in the first half of the year and increase by 1.5% in the second half from the previous year. Current profits are expected to increase by 6.3% in the first half and decrease by 11.5% in the second half from the previous year.
Firms' judgments on current business conditions have been almost flat. The BOJ Tankan (December survey) revealed that DI for firms' judgment on current business conditions rose for all enterprises in all industries by 2 points from the previous quarter. By industry, the DI rose for all enterprises in the manufacturing industry by 4 points from the previous quarter, and remained unchanged for all enterprises in the non-manufacturing industry. Firms' judgment on future business conditions, which indicates the business conditions as of March, is slightly more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (February survey), current business conditions rose while prospective business conditions remained unchanged.
The number of corporate bankruptcies appears to be increasing. The number of corporate bankruptcies was 887 in January and 851 in February. Total liabilities were 119.8 billion yen in January and 133.1 billion yen in February.
The employment situation shows movements of improvement.
The employment situation shows movements of improvement. The sense of a labor shortage is at a high level.
The total unemployment rate was 2.7% in January, an increase of 0.1 percentage points from the previous month. The labor force and the number of employed persons decreased. The number of unemployed persons increased. The employment rate is on a moderate upward trend.
Looking at Employment Referrals for General Workers, the number of new job offers at Public Employment Security Offices has bottomed out recently. The active job openings to applicants ratio has been showing signs of bottoming out recently.
Looking at the year-on-year number of job offers at private employment agencies, it is on a moderate downward trend for regular employment, while it is on a slight upward trend for part-time employment (excluding “casual work”).
As for the movement of wages, contractual cash earnings and the total cash earnings are increasing. Real wage income of employees is picking up moderately. Overtime hours worked in the manufacturing industry increased.
According to the BOJ Tankan, DI for firms' judgment on current employment conditions, which shows firms' sense of a labor shortage, was -38 for all industries in December, showing that the sense of a labor shortage increased by 2 points from the September survey (-36). The DI was -25 for manufacturers, showing that the sense of a labor shortage increased by 1 point from the September survey (-24), and the DI was -46 for non-manufacturers, showing that the sense of a labor shortage increased by 2 points from the September survey (-44).
As for short-term prospects of the employment situation, it is expected to improve.
3. Prices and the financial market
Producer prices are rising moderately. Consumer prices have been rising moderately recently.
Producer prices are rising moderately.
Consumer prices, in terms of general, excluding fresh food and energy, have been rising moderately recently.
Consumer prices, in terms of general, excluding fresh food (referred to as “core”) have been flat recently.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 14.2% expected a rise of less than 2% (12.2% in the previous month), 34.9% expected a rise of 2 to 5% (35.4% in the previous month), 22.2% expected a rise of 5 to 10% (26.7% in the previous month), and 14.3% expected a rise of 10% or more (17.0% in the previous month) in February.
As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to rise moderately for the time being.
As for stock prices, after declining from the 58,700-yen level to the 51,500-yen level, the Nikkei Stock Average rose to the 53,700-yen level. The yen against the U.S. dollar (inter-bank spot rate) moved in the direction of depreciation from the 156-yen level to the 158-yen level.