Japan's Services Growth Slows Amid Cost Pressures and Inflation Concerns

Japan's services sector expanded at a slower pace in July due to weakening demand and high cost pressures. The S&P Global Japan Services Purchasing Managers' Index (PMI) fell to 51.2, undershooting the flash reading of 51.9. This marked a second consecutive monthly expansion but at a much slower rate than earlier this year.

New business growth hit its lowest in two years, while foreign demand for Japanese services declined for the fourth straight month. Cost pressures remained high, with input prices rising at a rate just below June's four-year high.

Respondents cited inflationary pressure linked to the war in the Middle East, higher staff costs, and a weak yen as key drivers. Service providers raised their selling prices at the fastest pace since April 2014, when a rise in the consumption tax stimulated broad-based retail price hikes.