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Japan private-sector growth slows as weak yen keeps inflation pressure high

S&P Global said weaker domestic demand was the main drag, even as new export orders kept rising at the August pace.

Reported · Written up by our desk · Central Banks

Japan’s private-sector growth cooled in September, with S&P Global’s PMIs showing manufacturing easing to 54.1 from 54.9 and services down to 51.6 from 52.5. The composite PMI fell to 52.5 from 53.5, slipping to a four-month low pace even as the index stayed in expansion for an 18th straight month.

The slowdown was concentrated in domestic demand, according to the survey. New-order growth weakened, while new export orders continued to rise at the same marked pace as August’s eight-and-a-half-year high, driven by manufacturing as services export demand fell again.

Inflation pressure eased only marginally, with input-cost inflation dropping to a four-month low but staying sharp. Firms pointed to higher energy and raw-material costs tied to the Middle East conflict and the weak yen, alongside rising staff and transport expenses, while selling prices increased at a rate only slightly below the August survey record.

Action Forex reported S&P Global characterized the pattern as growth “slipping down a gear,” but with persistent high costs meaning Japan still faces softer domestic momentum alongside elevated price pressure rather than meaningful disinflation. The same release showed employment rising at the fastest pace in seven months and business confidence strengthening to its highest since February, supported by optimism around AI-related demand, semiconductors, defence and automobiles.

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