Services Sector Growth Outpaces Manufacturing

In January, Japan's services sector experienced a notable increase, with the Jibun Bank Flash Japan Services Business Activity Index rising to 52.7 from December's 50.9, according to S&P Global's preliminary report. This growth, surpassing the neutral 50 mark, indicates a positive shift in the sector's activity.

Manufacturing PMI Declines

Contrastingly, the Manufacturing PMI saw a decline from 49.6 in December to 48.8 in January, falling below the neutral mark. This downturn highlights the ongoing challenges faced by the manufacturing sector.

Composite PMI Shows Slight Improvement

The composite PMI, which combines the performance of both the services and manufacturing sectors, improved slightly from 50.5 in December to 51.1 in January. This indicates a modest overall growth in Japan's private sector.

Expert Insight: "Japan's private sector expansion continued into a third consecutive month at the start of 2025, with the rate of growth strengthening slightly on the month. That said, the headline index masks diverging trends in the two main sectors. The expansions in private sector business activity remained services-led, where the rate of increase strengthened to a four-month high. At the same time, manufacturing output fell at the strongest rate since last April," said S&P Global Market Intelligence economist Usamah Bhatti.