Japan Factory Activity Growth Hits 4-Month High

The S&P Global Japan Manufacturing PMI increased to 55.1 in August 2026 from 54.5 in the previous month, marking the eighth consecutive month of expansion in factory activity. It was the strongest growth in the manufacturing sector since April, as firms recorded the fastest increase in new work since January 2018, with foreign sales also growing at the strongest pace since early 2018. Meanwhile, employment rose solidly. Input buying increased solidly due to higher production, while stock purchases grew slightly amid further lengthening of suppliers' delivery times. On the price front, input prices rose, driven by higher raw material, fuel, and staffing costs, a weak yen, and higher energy costs linked to the war in the Middle East. As a result, output prices continued to rise rapidly. Finally, business sentiment improved, supported by expectations of higher sales, greater operational capacity, and stronger market conditions.

The S&P Global Japan Manufacturing PMI was revised lower to 54.5 in July 2026 from the preliminary estimate of 54.7, following a final reading of 54.8 in the previous month. It marked the seventh straight month of expansion in factory activity, as output grew the most since early 2014, supported by the steepest rise in new orders in four-and-a-half years amid strong AI-related demand. Employment increased solidly, while backlogs of work rose for the seventh straight month and at the fastest pace since February 2014. Purchasing activity rose for the fourth consecutive month, with the rate of accumulation being the sharpest since May 2024, while stocks of finished goods neared stabilisation. Meanwhile, suppliers' delivery times lengthened markedly. On prices, input price inflation eased to a four-month low, while output prices rose sharply. Finally, business sentiment improved to its highest level in four months, supported by hopes of stronger demand, particularly for semiconductors.

The S&P Global Japan Manufacturing PMI inched down to 54.7 in July 2026 from 54.8 in the previous month, but surpassed market expectations of 54.5, preliminary estimates showed. It was the seventh straight month of expansion in factory activity, supported by faster increases in output, while new orders grew at the fastest pace in over five years. Meanwhile, employment increased at a faster pace. Purchasing activity rose at the fastest pace in more than four years, feeding through to higher stocks of purchases amid ongoing supply chain disruption and higher prices linked to the conflict. Stocks of finished goods also rose, marking the first increase in two years. On the price front, input price inflation eased, while output price inflation slowed to a three-month low. Finally, business sentiment improved to its highest level in four months, supported by hopes of new product launches and stronger demand, notably in the AI and semiconductor industries.