Japan business activity expands for 9th successive month despite softer PMI

PMI eased to 51.5 in December, but new demand and hiring strengthened.

Japan’s private sector output expanded for a ninth consecutive month in December, supported by a renewed increase in new orders, according to S&P Global’s Flash Japan Composite PMI.

The Composite Output Index eased to 51.5 from 52.0 in November but remained above the 50.0 no-change threshold, signalling continued growth at a pace faster than the post-pandemic average.

Data split by sector indicated that a slightly quicker, but still marginal, decline in manufacturing output and a slower increase in services activity weighed on the headline index reading in December.

New orders returned to expansion after two months of contraction, recording their strongest increase since August. Services drove the improvement, whilst the decline in manufacturing demand moderated to its slowest pace in 18 months.

External demand remained weak, with composite new export orders falling again. Manufacturing exports declined at a solid pace, partly offset by a marginal improvement in overseas services demand.

Amidst firmer overall demand conditions, companies added to their payroll numbers again in December. Employment rose at its fastest rate since May 2024, supported by increased hiring across both manufacturing and services.

Firms continued to expect output growth in 2026, although business confidence softened from November, led by weaker sentiment among goods producers.