Monthly Economic ReportExecutive Summary( sep 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 and natural disasters.
- Private consumption shows movements of picking up.
- Business investment is picking up.
- Exports have been showing movements of picking up.
- Industrial production shows movements of picking up as a whole.
- Corporate profits are improving, while attention should be given to the effects caused from the situation in the Middle East.
- The employment situation shows movements of improvement.
- Consumer prices have been rising moderately.
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 and natural disasters. Also, attention should be given to the effects of fluctuations in the financial and capital markets and so on.
(Policy stance)
Based on the "Basic Policies on Economic and Fiscal Management and Reform 2026" approved by the Cabinet on July 21, the Government will strive to implement both “Strong Japanese Economy” and “fiscal sustainability” in an integrated manner, embracing an approach of “responsible and proactive public finances”. In the near term, the Government will ensure the transition to a growth-oriented economy by not returning to deflation, while responding flexibly to various risks.
In response to the situation in the Middle East, in the near term, the Government has carried out emergency measures to curb dramatic fluctuations in the price of fuel oil and a mitigation measure for electricity and gas price increases. Through alternative procurement of crude oil and the release of oil stockpiles, the Government will work to ensure a stable supply of crude oil when the situation requires it. The Government will also work to ensure a stable supply and the smooth distribution of critical materials. The Government will implement the FY2026 budget and the FY2026 supplementary budget, which was compiled to minimize risks, in an appropriate and flexible manner in response to developments in the situations.
Regarding the 2026 Kumamoto Earthquake, the Government will swiftly implement the “Package to Support the Lives and Livelihoods of the Affected People.”
On September 18th, the Bank of Japan decided to encourage the uncollateralized overnight call rate to remain at around 1.25 percent.
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 April–June 2026 (Second Preliminary Estimates), the real term of private consumption increased by 0.0% from the previous quarter. According to the Consumption Trend Index (CTI), the real term of the Total Consumption Trend Index (CTI macro) decreased by 0.0% from the previous month in July.
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) decreased by 0.4% from the previous month in July. Looking at Current Survey of Commerce, which comprises supply-side statistics, the retail sales value increased by 2.1% from the previous month in July.
Looking at the background of consumption trends, real wage income of employees is increasing moderately. Consumer sentiment shows movements of picking up.
Moreover, based on the interview results, new automobile sales are almost flat. The increase of home appliance sales has come to a pause. 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, consumption is expected to pick up, supported by the improvement in the employment and income situations. However, attention should be given to the trends in consumer sentiment.
Business investment is picking up.
Business investment is picking up. The Quarterly Financial Statements Statistics of Corporations by Industry (April–June survey, including software investment) show that business investment increased in the April–June quarter of 2026 by 1.5% from the previous quarter. By industry, business investment increased for manufacturers by 0.4% from the previous quarter and increased for non-manufacturers by 2.0%.
Capital Goods Shipments and Imports (excluding transport equipment), which comprise supply-side statistics on investment in machinery and equipment, are picking up. Software investment is increasing at a slower pace.
According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (June survey) and the Business Outlook Survey (July–September survey), planned business investment for all industries in fiscal year 2026 is expected to increase. According to the BOJ Tankan (June survey), the DI for firms’ judgment on production capacity was -2 for manufacturers, showing that the sense of insufficient capacity increased by 1 point from the March survey (-1), while the DI was -4 for all industries, including non-manufacturers, showing that the sense of insufficient capacity increased by 1 point from the March survey (-3). The figures for Orders Received for Machinery, a leading indicator, are picking up. The planned amount of construction shows movements of picking up.
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 flat as a whole.
Housing construction is flat as a whole. New construction starts of dwellings decreased by 1.6% from the previous month to 774,000 dwelling units (annualized) in July. By owner occupant relation, construction of owned houses is in a weak tone. Construction of houses for rent shows movements of picking up. Construction of houses for sale is flat as a whole. 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 flat as a whole for the time being.
Public investment holds firm.
Public investment holds firm. The amount of public construction completed in July decreased by 0.0% from the previous month, the amount of contracted public works in August decreased by 3.9% from the previous month, and the amount of public works orders received in July decreased by 18.0% from the previous month.
As for short-term prospects too, public investment is expected to hold firm.
Exports have been showing movements of picking up. Imports are almost flat. The balance of goods and services is in deficit.
Exports have been showing movements of picking up. By region, exports to Asia have appeared to be pausing for picking up recently. Exports to the U.S. and the EU have been showing movements of picking up. Exports to other regions are showing signs of bottoming out, while exports to the Middle East region have been decreasing. 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 other factors.
Imports are almost flat. By region, imports from Asia and the EU are almost flat. Imports from the U.S. show movements of picking up, with imports of mineral fuels increasing recently. 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 deficit.
The deficit in the balance of trade in July decreased, as export values increased to a larger extent than import values. The deficit in the balance of services decreased.
2. Corporate activities and employment
Industrial production shows movements of picking up as a whole.
Industrial production shows movements of picking up as a whole. The Indices of Industrial Production decreased by 0.2% from the previous month in July. The Indices of Industrial Inventories increased by 0.5% from the previous month in July. The Survey of Production Forecast in Manufacturing expects an increase of 6.4% in August and a decrease of 4.2% in September.
By industry, transport equipment shows movements of picking up. Production machinery has been picking up recently. Electronic parts and devices have appeared to be pausing for picking up recently.
As for short-term prospects, production is expected to pick up. However, attention should be given to the risk of downward pressure due to the situation in the Middle East and the 2026 Kumamoto Earthquake.
Tertiary industry activity is increasing moderately.
Corporate profits are improving, while attention should be given to the effects caused from the situation in the Middle East. Firms’ judgment on current business conditions has been almost flat. However, their judgement on future business conditions is slightly more cautious. Therefore, attention should be given to the effects of the situation in the Middle East. The number of corporate bankruptcies is almost flat.
Corporate profits are improving, while attention should be given to the effects caused from the situation in the Middle East. According to the Quarterly Financial Statements Statistics of Corporations by Industry (April–June survey), corporate profits during the April–June quarter of 2026 increased by 24.6% from the previous year and by 11.0% from the previous quarter. By industry, manufacturers saw an increase of 57.0% in corporate profits from the previous year, and non-manufacturers saw an increase of 9.8%. By size of company, large and medium-sized companies saw an increase of 28.9% from the previous year, and small companies saw an increase of 4.4%. According to the BOJ Tankan (June survey), in fiscal year 2026, sales are expected to increase by 3.4% in the first half of the year and 1.6% in the second half from the previous year. Current profits are expected to decrease by 6.4% in the first half and 6.6% in the second half from the previous year.
Firms' judgment on current business conditions has been almost flat. However, their judgement on future business conditions is slightly more cautious. Therefore, attention should be given to the effects of the situation in the Middle East. The BOJ Tankan (June survey) revealed that the DI for firms' judgment on current business conditions remained unchanged for all enterprises in all industries. By industry, the DI rose for all enterprises in the manufacturing industry by 2 points and remained unchanged for all enterprises in the non-manufacturing industry from the previous quarter. Firms' judgment on future business conditions, which indicates the business conditions as of September, is slightly more cautious than their judgement on current business conditions. Therefore, attention should be given to the effects of the situation in the Middle East. According to the corporate activity-related DI of the Economy Watchers Survey (August survey), current and prospective business conditions both rose.
The number of corporate bankruptcies is almost flat. The number of corporate bankruptcies was 1,028 in July and 830 in August. Total liabilities were 236.3 billion yen in July and 144.7 billion yen in August.
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 2.4% in July, a decrease of 0.1 percentage points from the previous month. The labor force, the number of employed persons, and the number of unemployed persons all decreased. 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 is almost flat. The active job openings to applicants ratio is almost flat.
Looking at the year-on-year number of job offers at private employment agencies, it is on a slight upward trend for regular employment, while it is on a moderate 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 increasing moderately. Overtime hours worked in the manufacturing industry decreased.
According to the BOJ Tankan, the DI for firms' judgment on current employment conditions, which shows firms'sense of a labor shortage, was -37 for all industries in June, showing that the sense of a labor shortage decreased by 1 point from the March survey (-38). The DI was -27 for manufacturers, showing that the sense of a labor shortage decreased by 1 point from the March survey (-28), and the DI was -43 for non-manufacturers, showing that the sense of a labor shortage decreased by 2 points from the March survey (-45).
As for short-term prospects of the employment situation, it is expected to improve.
3. Prices and the financial market
Producer prices have been rising at a slower tempo recently. Consumer prices have been rising moderately.
Producer prices have been rising at a slower tempo recently.
Consumer prices, in terms of all items, less fresh food and energy, have been rising moderately.
Consumer prices, in terms of all items, less fresh food (referred to as “core”) have been rising moderately.
According to the Monthly Consumer Confidence Survey (multi-person households), as for the ratio of households expecting prices to rise a year ahead, 11.7% expected a rise of less than 2% (10.0% in the previous month), 31.2% expected a rise of 2 to 5% (30.7% in the previous month), 28.0% expected a rise of 5 to 10% (30.8% in the previous month), and 18.1% expected a rise of 10% or more (21.3% in the previous month) in August.
As for short-term prospects, consumer prices ( all items, less fresh food and energy) are expected to rise moderately for the time being.
As for stock prices, after declining from the 66,400-yen level to the 63,400-yen level, the Nikkei Stock Average rose to the 66,300-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of depreciation from the 159-yen level to the 160-yen level, moved in the direction of appreciation to the 153-yen level, and thereafter moved in the direction of depreciation to the 158-yen level.