Japan’s factory activity expands at faster pace in June as new orders surge, PMI shows

[TOKYO] Japan’s manufacturing sector sustained robust growth in June, with new orders surging to their fastest pace in more than four years, though cost pressures continued to intensify due to the repercussions from the Iran war, a survey showed on Tuesday (Jun 23).

The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) edged up to 54.9 in June from 54.5 in May, rebounding closer to April’s 55.1 that marked the strongest expansion since January 2022. PMI readings above 50 indicate growth in activity, while those below that level point to a contraction.

Factory output rose at a slightly quicker rate, while new orders accelerated to their fastest pace in more than four years. This was partly driven by stock-building among customers concerned about supply disruptions and future price increases stemming from the Iran war, according to the survey.

The growth of new export orders slightly slowed from May, when it was at the fastest pace in five years.

Manufacturers’ input and output inflation eased but still hovered near their highest since late 2022, as the conflict in the Middle East pushed up expenses for energy, fuel and raw materials.

Employment in manufacturing increased at the fastest pace in more than eight years in June.

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The services sector rebounded after a pause in May, with the flash Japan services PMI rising to 51.8 from 50, supported by improved domestic conditions while foreign demand shrank faster. The flash Japan composite PMI, which combines manufacturing and services, rose to 52.5 in June from 51.1 in May.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: “Overall business activity growth across Japan picked up for the first time since the outbreak of war in the Middle East ... while this suggests a strong Q2 performance overall, it is important to note that the current period of growth is partly being driven by stock-piling efforts amid the war in the Middle East, and these efforts are likely to fade in the months ahead.” REUTERS