In Japan, the Indexes of Business Conditions (CI) calculated by the Cabinet Office of the Government of Japan is employed for assessing business cycle. The CI consists of three components, such as leading, coincident, and lagging indexes. The CI is calculated by composing monthto-month percentage changes in multiple economic indicators. On contrary, in the U.S., for observing business condition, a stochastic business indicator is mainly employed. This study applies the latter U.S. approach to estimate a latent stochastic business indicator for Japanese economy according to Stock and Watson (1989，1990) using a state space model solved by Kalman filter. The estimated stochastic business indicator seems to fit quite well to existing Japanese official Indexes of Business Conditions. The estimated results appear to indicate that the trough month of the latest recession in Japan is March 2009
