Economic Buzz: Japan manufacturing growth continues but slows amid rising cost pressures

Japan?s manufacturing sector continued to expand in March, though growth eased from February?s stronger pace, according to the latest PMI survey.

The Manufacturing PMI declined to 51.6 from 53.0, signalling a slower but still steady improvement in conditions. Despite the drop, it remained among the strongest readings since mid-2022.

Output and new orders rose for the third consecutive month, supported by demand in sectors such as semiconductors, artificial intelligence, and automotives. However, growth in both areas moderated. Export orders also increased, but at a softer pace.

Employment continued to rise as firms expanded capacity and addressed labour shortages, though hiring growth slowed. Backlogs of work increased slightly, indicating demand continued to exceed production.

Supply chain pressures persisted, with delivery times lengthening again, while semiconductor shortages remained a concern.

Cost pressures intensified, with input prices rising at the fastest rate in 19 months due to higher raw material and energy costs, as well as a weaker yen. Firms responded by increasing selling prices.

Business confidence for the year ahead softened slightly but remained stable, supported by expectations of demand in technology-related sectors despite ongoing global uncertainties.

Powered by Commodity Insights