Japan Composite PMI Highest in Five Months

Japan’s S&P Global Composite PMI Business Activity Index edged up to 53.1 in July 2026 from a final 52.8 in the prior month, flash data showed. It was the highest reading since February, marking the 16th straight month of expansion in private sector activity. Manufacturing output surged at the fastest pace since 2014, while services growth eased. Overall new orders rose more slowly, reflecting weaker service demand, though foreign sales climbed at the quickest rate in four months. Hiring extended its 34-month run, with employment growth steady, but capacity strains mounted as backlogs built at the fastest pace since February’s record. On prices, input cost inflation hit its lowest since April yet remained elevated amid Middle East conflict-driven supply and energy pressures. Firms raised selling prices more sharply, while business confidence softened from June, weighed by concerns over energy costs, raw materials, and supply chain risks tied to the ongoing geopolitical uncertainty.

Japan’s S&P Global Composite PMI Business Activity Index was revised higher to 52.8 in June 2026 from the flash estimate of 52.5, marking its highest level since March and extending the sector’s expansion streak to 15 consecutive months. The improvement came as service providers reported stronger business activity, while manufacturing output also continued to recover. New orders rose at the fastest pace since February, supported primarily by domestic demand, although foreign demand increased only marginally. Firms also reported the strongest accumulation of backlogged work in four months, prompting a slightly faster, though still modest, increase in hiring. On the price front, cost pressures intensified, with input prices rising at the sharpest pace in four years, reflecting higher labor, raw material, and operating costs. Businesses continued to pass part of these higher costs on to customers, although output price inflation eased from May’s record high and remained elevated overall.

Japan’s S&P Global Composite PMI rose to 52.5 in June 2026 from a final 51.1 in May, according to flash estimates. The reading was the highest since March, marking the 15th month of expansion in private-sector activity and remaining above the post-pandemic average. Growth was driven by the strongest increase in manufacturing output since January 2022, while services activity grew modestly. New orders rose the most in four months, supported by a slight rise in foreign demand. Backlogs of work increased at the fastest pace in four months, though employment rose modestly after May’s seven-month low. On inflation, input cost accelerated for a fifth month to its strongest since July 2022, due to higher energy, fuel, and raw material costs linked to the Middle East war. That said, output price inflation eased from May’s record. Lastly, sentiment weakened further and remained below its average, reflecting supply chain disruptions from the Middle East conflict and persistent labor shortages.