Japan Services Growth Slows Amid Intense Cost Pressures
The services sector in Japan expanded at a slower pace in July as demand weakened and firms struggled with intense cost pressures, leading to the highest inflation in selling prices since April 2014. The S&P Global Japan Services Purchasing Managers' Index (PMI) fell to 51.2 in July from 52.2 in June, undershooting the flash reading of 51.9.
Readings above 50.0 indicate growth in activity, while those below point to a contraction. The slowdown marked the second consecutive monthly expansion but at a much slower rate than in earlier months of 2026.
New business growth hit its lowest level in two years, and foreign demand for Japanese services declined for the fourth straight month. However, the rate of contraction eased from June and May.
Cost pressures remained high, with input prices rising at a rate just below June's four-year high. Respondents cited a strong inflationary environment linked to the war in the Middle East, higher staff costs, and a weak yen as key drivers, according to the survey.