Japan’s coincident economic index, which tracks factory output, employment, and retail sales, rose to 116.8 in January 2026 from a final 114.3 in the prior month, according to flash data. It marked the highest reading since February 2025, signaling a moderate improvement in overall economic activity. The impact of recent U.S. trade policies appears to be concentrated mainly in the automotive sector, while other areas of the economy showed more resilience. Also, employment and income conditions improved, helping lift household consumption, while business investment also showed signs of recovery despite lingering cost pressures. On the policy front, the Bank of Japan kept its key short-term interest rate unchanged at 0.75% at its first meeting of 2026. In its quarterly outlook, the board raised its FY2025 GDP growth forecast to 0.9% from 0.7%, citing support from a recent trade deal with Washington and Tokyo’s sizable stimulus package.
