Reproductive success can be influenced by the match or mismatch between the spawning season and optimal environmental conditions for larval survival. However, it is challenging to understand how temporal factors affect population dynamics. In the central Seto Inland Sea, Hiuchi‐nada, western Japan, the recruitment of Japanese anchovy (Engraulis japonicus) has markedly decreased in the last decade. To explore the causes of this decline, egg survey and commercial catch data from 1994 to 2019 (26 years) between April and August were used to examine egg production, hatch date, and early survival in relation to environmental factors. Otolith microstructure analysis indicated that most landed larval and juvenile fish (recruits) hatched in May and June. Egg and recruit abundances were negatively correlated over the study period. The survival indices from hatching to recruitment were higher in waters at 16–24°C in a given season until the mid‐2000s. Thereafter, they decreased over the studied temperature range and remained relatively low over the last five years. The copepod nauplii densities from 2015 to 2019 were significantly higher than those from 2002 to 2005 due possibly to the effect of increasing temperature, but the ratio of copepod nauplii density to larval density in May and June from 2015 to 2019 was approximately 34% and 66% of those from 2002 to 2005, respectively. These findings and the hydrodynamic features of these waters suggest that the recent decline in recruit abundance is partly due to a decrease in larval survival in response to increasing intracohort competition for prey in early‐life stages.