Key facts
- Japan's manufacturing sector expanded in June, achieving its strongest quarterly performance since early 2014.
- The S&P Global Japan Manufacturing PMI increased to 54.8 in June, up from 54.5 in May.
- New orders for Japanese manufacturers grew at their fastest pace in over two years.
- Production output rose at the second-sharpest pace since January 2022.
- Employment growth continued for the 19th consecutive month.
- Manufacturers expressed optimism for future output, citing demand for AI and semiconductors.
Japan's manufacturing sector experienced growth in June, capping its best quarterly performance since early 2014. The S&P Global Japan Manufacturing Purchasing Managers' Index (PMI) rose to 54.8, up from 54.5 in May, indicating continued expansion for the sixth consecutive month. This growth was driven by new orders, which increased at the fastest pace since January 2022, supported by stronger domestic demand and clients building inventories amid concerns over Middle East conflict-related shortages and price hikes. Export orders also saw solid growth. Production output rose at its second-fastest pace since January 2022, although output for consumer goods manufacturers declined. Employment continued to grow, reaching its fastest pace since April 2018. However, backlogs of work increased significantly, and price pressures remained elevated with input cost inflation at a multi-year high. Manufacturers maintained an optimistic outlook for the next year, citing demand for AI and semiconductors, but concerns over geopolitical tensions, costs, labor shortages, and the weak yen persist.