Japan’s manufacturing sector contracts at slower pace in December, PMI shows
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Looking ahead to 2026, business confidence in Japan was robust in December but waned from the previous month, particularly in manufacturing.
PHOTO: AFP
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- Japan's manufacturing sector contracted for the sixth month, but at a slower rate; the Manufacturing PMI rose to 49.7 in December.
- The services sector slowed, with the services PMI slightly declining to 52.5; composite PMI fell to 51.5, indicating slower growth.
- Business confidence remained robust but waned due to global economic uncertainty, an ageing population and rising costs, impacting outlooks for 2026.
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TOKYO – Japan’s manufacturing activity contracted at a slower pace while the services sector lost some steam in December, private-sector surveys showed, weighing on the economy at end-2025.
Looking ahead to 2026, business confidence was robust but waned from the previous month, particularly in manufacturing, with the surveys attributing the uncertain outlook to global economic conditions, an ageing population and rising costs.
The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) rose to 49.7 from 48.7 in November, extending a contraction for the sixth straight month. The 50-point mark separates expansion from contraction.
“Growth remains centred on the services sector... as manufacturing production and sales weakened further,” said Ms Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
Factory output waned slightly in December from November but demand for goods fell at the slowest rate in 1½ years. Ms Fiddes added that the improvement suggests the sector could be stabilising.
A closely watched Bank of Japan quarterly survey released on Dec 15 showed that big Japanese manufacturers’ business sentiment hit a four-year high in the three months to December. But firms expected conditions to worsen in the three months ahead as they fret over the impact of higher US tariffs and soft consumption.
Meanwhile, the flash Japan services PMI fell slightly to 52.5 in December from 53.2 in November. Combining manufacturing and services, the flash composite PMI declined to 51.5 in December from 52 in the previous month.
At the composite level, the survey showed that overall employment rose at the fastest pace since May 2024 and outstanding business expanded at the quickest pace in 2½ years. On the other hand, the rate of inflation climbed at the fastest pace in eight months and both goods and services firms raised their selling prices. REUTERS
