Japan’s coincident economic index rose marginally to 118.8 in August 2026 from a flash estimate of 118.7, but fell from 120.6 in the previous month, marking its lowest reading since May. The index, which tracks current economic conditions through indicators such as industrial production, employment and retail sales, reflected the impact of natural disasters and disruptions linked to tensions in the Middle East. Despite the slowdown, Japan’s economy continued to recover moderately, supported by improving employment and income conditions and government measures that boosted private consumption. Business investment also strengthened, although firms remained cautious about the outlook. Meanwhile, the Bank of Japan kept its short-term policy rate at 1.0% in July, its highest level since September 1995, while signaling the possibility of further hikes as underlying inflation moves toward its 2% target and financial conditions remain accommodative.