Japan’s index of coincident economic indicators - which tracks key data such as factory output, employment, and retail sales - dropped to 113.3 in July 2025 from a downwardly revised 115.9 in the previous month, flash data showed. This was the lowest level since February 2024, reflecting concerns over elevated inflation, driven in part by surging rice prices despite Tokyo’s efforts to ease the burden by importing more rice from the U.S., Thailand, and China. At the same time, risks to Japan’s economy have been compounded by uncertainty over U.S. trade policies. Meanwhile, the Bank of Japan left its key short-term interest rate unchanged in July, keeping borrowing costs at their highest level since 2008. Policymakers also raised their core inflation forecast for FY2025 to 2.7%, up from April’s projection of 2.2%.