Japan Manufacturing Sector Returns to Growth

The S&P Global Japan Manufacturing PMI was revised higher to 51.6 in March 2026 from a preliminary estimate of 51.4. However, the latest reading fell from a near four-year high of 53.0 in the previous month, as both output and new orders eased from the solid pace seen in February, which in turn contributed to a softer rise in staff numbers. Meanwhile, employment rose further, due to efforts to expand capacity and address long-standing labour shortages. However, the rate of job creation was the softest seen in 2026 to date. On prices, input cost inflation accelerated to the highest level since August 2024, boosted by higher raw material and energy prices. Higher labour costs and a weaker yen exchange rate also lifted prices. As a result, firms raised selling prices at the fastest pace since June 2024. Finally, business sentiment weakened from February's recent high, amid caution around growth projections due to the war in the Middle East.

The S&P Global Japan Manufacturing PMI fell to 51.4 in March 2026 from a near four-year high of 53.0 in the previous month, below market expectations of 52.8, according to flash estimates. It marked the lowest reading since December 2025, as new order growth slowed notably, with total new export business expanding at the weakest pace recorded in the current three-month expansion period. Meanwhile, manufacturers increased their staffing levels in March, albeit at a slower pace. On the price front, input cost inflation rose to its highest level in nearly a year, partly driven by the Middle East conflict and its impact on supply chains and energy prices. However, output prices increased at the slowest pace in three months. Finally, Japanese manufacturers remained optimistic about the year-ahead outlook, although confidence fell to an eleven-month low amid rising uncertainty related to the Middle East conflict.

The S&P Global Japan Manufacturing PMI rose to 53 in February 2026 from 51.5 in January, above the initial estimate of 52.8, as companies signaled a stronger recovery in business conditions, with output, new orders, and employment growth all accelerating since January. This marked the strongest manufacturing expansion since May 2022. Output grew at a solid pace, the fastest in just over four years, with firms often citing rising new business as a key driver. Total new orders also expanded robustly, the fastest since January 2022. Employment across Japan’s manufacturing sector increased further in February, extending the current streak of job creation to 15 months. Meanwhile, higher costs for raw materials, labor, and transport pushed average input costs higher during the month. Looking ahead, the 12-month outlook rebounded to its highest level since June 2024, with firms optimistic that improved global demand and new product launches will continue to support growth.