Japan Manufacturing Sector Returns to Growth

The S&P Global Japan Manufacturing PMI was confirmed at 54.5 in May 2026, matching the preliminary estimate and following a reading of 55.1 in April, which was the highest since January 2022. However, the latest reading still signaled expansion, albeit at a slower pace, as output continued to rise. Production growth was partly supported by stockpiling efforts, as the war in the Middle East continued to impact product availability and drive up prices. However, total new order growth slowed slightly despite a stronger rise in foreign demand, with new export business increasing at the fastest pace in five years. Purchasing activity increased to guard against future shortages, while employment rose solidly. On prices, input price inflation accelerated to the fastest pace since September 2022 due to higher material prices, while selling prices rose at the quickest pace since October 2022. Finally, sentiment improved amid hopes of stronger consumer demand and new product development.

The S&P Global Japan Manufacturing PMI declined to 54.5 in May 2026 from 55.1 in April, which was the highest reading since January 2022 and in line with market forecasts, preliminary estimates showed. However, the latest reading still signaled expansion, though at a softer pace, as output continued to rise. Production growth was partly supported by stockpiling efforts, as the war in the Middle East continued to impact product availability and drive up prices. Meanwhile, new order growth eased, while foreign sales increased modestly. Employment also rose, with backlogs of work building up. On prices, input prices increased due to material shortages, while selling prices also rose in response to higher input costs. Looking ahead, business confidence remained positive.

The S&P Global Japan Manufacturing PMI rose to 55.1 in April 2026, exceeding the flash estimate of 54.9 and accelerating from 51.6 in March. This was the highest reading since January 2022, with output growing the most since February 2014 amid a solid rise in new orders, the quickest in over two years, as the war in the Middle East prompted customers to frontload purchases to avoid potential supply disruptions and rising costs. Employment increased at the second-fastest pace since early 2022. Yet supply strains deepened: backlogs surged at the sharpest pace since 2014, while delivery times lengthened most since 2011. Purchasing activity stayed firm, though it eased from March. On prices, input costs jumped at the fastest rate since Oct. 2022 due to higher raw material, energy, and transport expenses, prompting selling prices to rise at the quickest pace since late 2022. Finally, confidence weakened to its second-lowest since June 2020 amid geopolitical risks and broader uncertainty.