Japan’s service sector returned to expansion in June, helping lift overall private-sector activity to its strongest pace in three months. The final S&P Global Japan Services PMI Business Activity Index rose to 52.2 from the neutral 50.0 reading in May, marking renewed growth after a brief pause. The Composite Output Index, which combines manufacturing and services, climbed from 51.1 to 52.8, reflecting stronger manufacturing output alongside a recovery in services activity.
Survey details suggested domestic demand remained the main driver of growth. According to S&P Global, new business across manufacturing and services expanded at the second-fastest pace in three years, supported largely by firmer domestic orders. External demand, however, was less supportive. New export business grew at its slowest pace in six months as service providers reported a noticeable decline in overseas demand, partly reflecting lower tourist arrivals. Business activity nevertheless continued to expand for the 14th time in the past 15 months, with firms citing higher volumes of new work and upcoming events.
Despite the improvement in activity, inflation pressures remained elevated. S&P Global said input costs rose at the fastest pace in four years as supply chains continued to feel the effects of the Middle East conflict, prompting another marked increase in selling prices. Firms were only slightly more optimistic about the outlook, with uncertainty surrounding geopolitical developments and rising costs tempering confidence. The survey suggests Japan’s economy continues to expand at a moderate pace, though persistent cost pressures are likely to keep the Bank of Japan attentive to the inflation outlook in the months ahead.
| Indicator | Previous | Latest |
|---|---|---|
| Services PMI Business Activity | 50.0 | 52.2 |
| Composite PMI Output | 51.1 | 52.8 |
