Japan Services Growth Slows

Japan’s S&P Global Services PMI Business Activity Index stood at 51.3 in September 2026, down from a flash reading of 51.6 and August's 52.5. The latest result was below the average in 2026 so far, as new orders rose at a softer pace, partly reflecting disruptions from the Kumamoto earthquake, while export orders continued to fall sharply. Employment growth accelerated to its fastest since February, helped by rising customer demand and efforts to expand capacity. However, backlogs of work increased at the fastest rate in seven months, pointing to mounting capacity pressures. Input costs continued to rise sharply, although the pace of inflation eased to a six-month low, with higher raw material, labor, oil and food costs cited. Firms raised selling prices at one of the sharpest rates on record. Meanwhile, business confidence improved to its highest level since June, supported by expectations of stronger demand, new products, diversification and capacity investment.

Flash Japan’s S&P Global Services PMI Business Activity Index fell to 51.6 in September 2026 from a final 52.5 in August, which had marked the highest reading since March. New orders continued to rise but more slowly, while overseas demand fell further. Meanwhile, employment growth accelerated, supporting another rise in private-sector employment.

Japan’s S&P Global Services PMI Business Activity Index rose to 52.5 in August 2026 from the flash reading of 52.3 and July’s 51.2. This marked the strongest pace since March, as new orders rose at a faster pace after hitting a 25-month low in July, with growth slightly above the 2026 average, supported mainly by firmer domestic demand. In contrast, export demand continued to decline. Job creation slowed to its weakest pace in a year and remained marginal. Outstanding business increased only slightly, with the rate of accumulation little changed from July’s 17-month low. Meanwhile, input costs continued to rise substantially, although the pace eased slightly amid persistent cost pressures. Selling-price inflation reached its second-fastest pace since the survey began in late 2007, surpassed only in April 2014 following a national consumption-tax hike. Confidence improved modestly, lifted by planned expansion, AI-related efficiency gains and expectations of stronger customer numbers.