The Bank of Japan assesses the current situation of Japan’s economy as follows: “Japan’s economy has recovered moderately, although some weakness has been seen in part, partly due to the impact of the situation in the Middle East.” To elaborate on this point, I would like to examine several elements of the economy, starting with developments in overseas economies. Regarding overseas economies, uncertainties heightened considerably in spring 2026, reflecting the situation in the Middle East, but since then, real economic activity has not seen a significant downward deviation on the whole (left panel of Chart 1). Against this backdrop, the Bank assesses that “overseas economies have grown moderately on the whole, although some weakness has been seen in part.” Looking at international commodity prices, crude oil prices have been at fairly high levels, as the situation in the Middle East remains unclear, but they have fallen below their peak levels reached in April (right panel of Chart 1). On the other hand, copper prices have remained elevated, partly reflecting strong global AI-related demand. Examining the trends in external demand for Japan’s economy amid these overseas developments, the effective exchange rate of the yen has been on a depreciating trend recently (left panel of Chart 2). In this situation, exports have increased moderately (right panel of Chart 2). By type of goods, increased exports of IT-related goods and capital goods, reflecting solid global AI-related demand, have been the driving force of overall exports