Japan’s manufacturing sector returned to expansion in January, with PMI Manufacturing finalized at 51.5. This marks the first improvement in operating conditions since mid-2025 and represents the strongest rate of growth since August 2022, offering early evidence of a cyclical recovery taking hold.
The details were encouraging. S&P Global Market Intelligence noted that output and new orders recorded their sharpest increases in almost four years, while export demand rose for the first time since 2022. Employment growth also accelerated to its fastest pace since September 2022, suggesting the sector is “gearing up for further increases in output in the months ahead.”
That said, cost pressures are resurfacing as a potential constraint. Input price inflation climbed to a near one-year high, driven in part by the weaker yen, and firms passed some of those costs on to customers. Whether these price pressures intensify will be key in assessing how durable the recovery proves to be.
