The Cabinet Office left its headline verdict on the economy untouched in its September monthly report, dated 29 September: the economy is recovering at a moderate pace, with attention needed on the Middle East and natural disasters. The changes sit in three lines below that verdict, where the report reworded its assessments of the trade balance, production and public investment.
For the earlier month's baseline, see our August report coverage.
What moved
| Indicator | August report | September report |
|---|---|---|
| Trade and services balance | Broadly balanced | In deficit |
| Production | Flat | Picking up as a whole |
| Public investment | Firm | Holding up (resilient) |
The trade-and-services balance is now described as being in deficit, where August called it broadly balanced. The report's own detail is less bleak than the label: July's trade deficit narrowed because the rise in export value outpaced the rise in import value, and the services deficit also narrowed.
Production moves from flat to picking up as a whole. The July industrial production index still fell 0.2% from the previous month, and inventories rose 0.5%. A manufacturers' survey cited in the report expects output to rise 6.4% in August and fall 4.2% in September. By sector, transport machinery and production machinery are picking up, while electronic parts and devices are pausing. The report warns of downside risk to production from the Middle East and the 2026 Kumamoto Earthquake.
The public investment line changed wording in Japanese from one word for firm to another that means holding up. The figures listed alongside it are mixed: July public works completed were down 0.0% from the previous month, August contract value fell 3.9% and July orders fell 18.0%.
What did not change
Business investment stays at picking up. The corporate statistics survey shows April-June investment, including software, up 1.5% from the previous quarter, with manufacturers up 0.4% and non-manufacturers up 2.0%. Corporate profits are still described as improving, with the Middle East flagged. April-June recurring profit rose 24.6% from a year earlier. The Bank of Japan's Tankan survey, however, expects recurring profit for the current fiscal year to fall 6.4% in the first half and 6.6% in the second. Exports stay at picking up, though shipments to Asia are pausing and those to the Middle East are showing signs of bottoming out.
Policy stance
The policy section keeps the emergency measures to curb swings in fuel oil prices and the mitigation measures for electricity and gas bills. It also keeps alternative crude oil procurement and stockpile releases where needed. The government says it will run the FY2026 budget and the supplementary budget flexibly, and will carry out its support package for people affected by the Kumamoto Earthquake.
The report records that the Bank of Japan decided on 18 September to encourage the uncollateralized overnight call rate to stay around 1.25%. That is a dated event the report notes, not a new decision. The government says it expects the central bank to achieve the 2% price stability target in a sustainable and stable manner.
On markets, the report says the yen moved between 153 and 160 per dollar over 28 August to 25 September, and the 10-year government bond yield ranged from 2.8% to 3.0%.