Japan’s private sector growth lost momentum in March as PMI data showed a broad-based slowdown across both manufacturing and services. PMI Manufacturing fell from 53.0 to 51.4, PMI Services eased from 53.8 to 52.8, and PMI Composite declined from 53.9 to 52.5, pointing to softer expansion after a strong start to the year.
The slowdown coincided with a sharp rise in input costs, with inflation accelerating to its fastest pace in nearly a year. According to S&P Global, higher energy prices and supply chain disruptions linked to the Middle East conflict were key drivers, alongside a weaker Yen and rising labor costs. While factory gate prices increased more quickly, service providers raised charges at a slower pace, resulting in a squeeze on margins.
S&P Global’s Annabel Fiddes noted that growth in output, new orders, and employment all moderated, with firms becoming more cautious amid heightened uncertainty. Confidence weakened, particularly in the services sector, as companies grappled with rising costs and unclear demand prospects. While manufacturers remain somewhat optimistic due to global demand in sectors such as AI and semiconductors, the overall outlook has become more uncertain as the war-driven shock feeds through the economy.
