Contrary to the shadow of the Iran war, the Japanese economy is showing signs of fatigue: the coincident indicator has dropped for the first time in two months, and the number of bankruptcies in the paint industry has reached a 23-year high.

Government data released on Tuesday showed that an index measuring the health of the Japanese economy declined in February, highlighting signs of weakness even before being affected by the Iran conflict. A recent private survey also showed an increase in bankruptcies in the house paint industry. The industry is mainly comprised of small-scale family-operated businesses already facing intense competition and long-term labor shortages, now further burdened by rising fuel prices and limited supply chains due to the war. The data indicated that the coincident index, which measures the current economic situation, fell by 1.6 points in February to 116.3, marking the first decline in two months. This decline was mainly due to a decrease in semiconductor chips and chip manufacturing equipment shipments, as well as a reduction in car production, casting doubt on the Bank of Japan's view that strong global demand would support exports. Countries like Japan, which rely heavily on importing oil and naphtha from the Middle East, are facing increasingly challenges as hopes for a quick end to the conflict diminish. Analysts say the shortage of naphtha will impact factory output, further exacerbating the damage to the overall economy starting this quarter. Tokyo Shoko Research, a private think tank, reported that the number of bankrupt paint companies increased by 22.2% in the fiscal year ending in March, reaching the highest level in 23 years. In a report released on April 3rd, Tokyo Shoko Research stated that major paint manufacturers have raised solvent prices by 70% to 80% starting from March due to interruptions in naphtha supply, a heavy blow to small paint companies. The report said, "Intense competition means small operators may not easily pass on the rising costs to others. Therefore, the number of bankruptcy cases in the 2026 fiscal year could further increase."