Japan’s services activity accelerated in August, with the PMI rising to 52.5 as stronger domestic demand boosted new business, while persistent cost pressures kept expectations of another Bank of Japan rate hike alive.
Japan’s services sector expanded at its fastest pace in five months in August, driven by stronger domestic demand and a pickup in business activity and new orders, according to the latest S&P Global survey.
The final Japan Services Purchasing Managers’ Index (PMI) rose to 52.5 in August from 51.2 in July, remaining above the 50 mark that separates expansion from contraction.
New business increased for the 26th consecutive month, with growth accelerating from July as underlying customer demand strengthened. However, export demand remained weak, with new export business contracting for a fifth straight month and recording its sharpest decline since November 2020.
Employment in the services sector also increased for the 12th consecutive month, although the pace of job creation slowed to its weakest level in a year.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, said the latest data showed that growth momentum had picked up across Japan’s services sector in August.
Cost pressures remain a concern
Despite some easing, input cost inflation remained elevated, falling to a four-month low but still ranking among the fastest rates recorded over the past three-and-a-half years.
More from BusinessCompanies continued to pass higher costs on to customers, pushing output charges to their second-highest rate on record. Persistent price pressures, combined with stronger economic growth, could strengthen the case for further monetary tightening by the Bank of Japan.
Business confidence improved from July but remained relatively subdued compared with recent standards.
The broader Composite PMI, which combines manufacturing and services activity, also strengthened, rising to 53.5 in August from 52.7 in July. It marked the strongest pace of private-sector expansion in six months.
