Japan's benchmark coincident composite index fell 1.4 points in September from the previous month, the Cabinet Office said in a preliminary report Monday.
The coincident composite index (CI), which reflects current business conditions here and spans industrial production, sales at shops and consumption of power, stood at 88.9 against the 2005 base of 100, the government data showed.
The office also said that the leading indicator, which gauges prospects in the economy few months ahead, including job offers and consumer sentiment, lost 2.2 points to 91.6, due to downside risks from overseas economies and a persistently strong yen.
Despite a recent intervention into currency markets to cool the yen's rise and recent relief over sovereign debt problems in the eurozone, the Japanese currency still remains relatively strong compared to its major counterparts and is seen as a safe haven for short-term speculators.
A strong yen negatively impacts Japan's vital export sector as firms reliant on profits made overseas lose revenue when funds are repatriated. In addition a strong yen dents exporters' profit outlooks and the overall competitiveness of exporters in foreign markets.
In addition, the cabinet office reported that the lagging CI, which reflects economic conditions three months ago, rose 1.7 points to 85.9 in September from 84.2 in the previous month.
Based on the preliminary report the government maintained its overall assessment of Japan's economy saying that the drop in the index is "halting".