The reason why 26 degrees temperature setting feels cold to them is because of a few quirks in the setup of the room, the aircon, and their sleeping position.
First, the house. A Japanese house doesn't have ventilation channels or grates in the ceiling. Hot air has no way to get out from the top. Additionally, if you have an aircon installed, Japanese law requires you to have good insulation and sealing in the room for energy saving. You're supposed to put in effort to make sure your aircon really cools only your room and not the garden outside. Replace the paper sliding doors with glass and insulate the walls.
Next, a ceiling aircon unit has its thermostat on the unit itself and blows cold air downward. So when it's set to 26 degrees, the part of the room that the thermostat is reading as 26 degrees is the area near the ceiling where it's located. This also happens to be where the hottest air in the room can be found, because hot air rises up and the ceiling is basically closed up, preventing circulation outwards. So the thermostat keeps telling the aircon unit to pump more and more cold air downwards while waiting for the hot top layer to cool down to the target temperature. Thanks to this quirk, the air below the stagnant top layer will be much colder than 26 degrees in the first hour or so before convection evens out and stabilizes the temperature in the room. Near the floor temperature can drop to 18 degrees or lower.
Finally, they sleep on the floor, where the coldest air is. The aircon may be set at 26, but down there they're feeling 18.