Economic Buzz: Japan?s business growth slows as costs rise and confidence weakens

Japan?s private sector continued to expand in April, but growth slowed to its weakest pace in four months. The S&P Global Flash PMI? Composite Output Index fell from 53.0 in March to 52.4 in April, remaining above the 50.0 mark that indicates expansion. This extends the current growth streak to 13 months, though the pace is the slowest seen in 2026 so far.

The moderation was driven by the services sector, where activity grew at its slowest rate in 11 months. In contrast, manufacturing output rose strongly, recording its fastest increase since February 2014. Some firms increased production due to concerns over future supply disruptions linked to the war in the Middle East.

New business rose modestly, with manufacturing seeing stronger demand while services recorded the weakest sales growth since October 2025. Export orders grew at a slower pace overall, with declines in services offsetting gains in manufacturing.

Employment continued to increase, extending a hiring trend of over two-and-a-half years. However, backlogs of work rose for the fifth consecutive month, pointing to ongoing capacity pressures.

Cost pressures intensified, with input costs rising at the fastest rate since January 2023 due to higher wages, raw materials, fuel, and energy prices. A weak yen and Middle East tensions added to these pressures. Selling prices increased at the fastest rate since data collection began in late 2007.

Business confidence fell for the second straight month to its lowest level since August 2020, as uncertainty linked to the Middle East conflict weighed on outlook.

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