Japan’s LEI Weakens in September

Summary

• Japan's leading economic index fell sharply in September to 116.4, down from a peak of 118 in August.
• The September index reading is only marginally higher than levels recorded in May and June of 2026.
• Rising share prices have boosted the leading index, while the interest rate spread signals advance as the Bank of Japan raises rates.
• Consumer confidence has risen mildly since April 2026, showing a 1.1% year-over-year increase, though the 24-month change remains negative.
• The Economy Watchers current index stands in the 47th percentile, while the outlook index is in the 41st percentile, both below historic medians.
• Household current conditions rank in the 53.4th percentile, with eating and drinking places in the 60th percentile, indicating less shrinkage than in August.
• Manufacturers report a queue percentile standing above neutral.
• The Bank of Japan is set for a rate hike, potentially at its next meeting, despite cooling leading index readings.
• The current conditions index continues to improve in September, suggesting growth is balanced enough to address inflation.
• The economy will benefit from fiscal stimulus, though financial conditions or foreign exchange behavior could shift policy dynamics.