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Japan PMI strengthens case for Bank of Japan rate hike in September
Japan’s private sector output expanded for the 17th consecutive month in August, and selling-price inflation neared record levels, reinforcing expectations for tighter policy.
Forexlive reports that S&P Global’s flash PMI showed Japan’s private sector activity accelerating in August, with output growth quickening to the fastest pace in six months.
The report said the headline Composite Output Index rose to 53.4 from 52.7 in July, driven by stronger new work in manufacturing. It also highlighted export orders at their strongest pace since 2018, supported by demand tied to semiconductors and AI, even as services saw a steeper decline in new export business.
Near record selling price inflation and a continued rise in employment were cited as key signals that cost pressures can remain manageable under tighter policy. Forexlive added that employment rose for a 35th straight month, addressing one of the Bank of Japan’s concerns about whether higher rates could be absorbed without derailing momentum.
Taken together, the data strengthened the argument for the Bank of Japan to proceed with a rate hike at its September meeting. The piece also noted that input cost momentum has been easing from June’s peak, offering a clearer window for further tightening despite an uneven recovery across goods and services.