Economic Buzz: Japan manufacturing records strongest quarterly performance since 2014

Japan?s manufacturing sector remained on a strong growth path in June, with business conditions improving at the fastest quarterly pace since the first quarter of 2014, supported by robust demand and higher production.

The headline S&P Global Japan Manufacturing Purchasing Managers? Index (PMI) rose to 54.8 in June from 54.5 in May, marking the second-sharpest improvement in operating conditions since January 2022, after April 2026. Growth was recorded across all three manufacturing sectors, led by intermediate goods producers.

Production expanded at the second-fastest pace since January 2022, driven by stronger sales. New orders recorded their quickest increase since the start of 2022, partly as customers built inventories to manage supply chain disruptions and rising prices linked to the conflict in the Middle East. Export demand also continued to grow, although at a slower pace.

Supply chain disruptions, vendor shortages and shipping delays continued to push up costs. Input price inflation remained unchanged from May?s 44-month high and among the fastest since the survey began in 2001, while manufacturers continued to raise selling prices.

Employment increased at the joint-fastest pace since April 2018, matching January 2022, although backlogs remained elevated. Manufacturers stayed optimistic about the year ahead, supported by expectations of stronger demand, particularly for AI and semiconductors, despite ongoing geopolitical and cost concerns.

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