Service growth in Japan accelerated in July, driven by robust customer demand, according to data from a PMI survey
Japan's Service Sector Boosts Economic Growth Despite Export Setbacks
Japan's service sector experienced a significant growth in July, expanding at its fastest rate in five months, despite a drop in export orders and tourist numbers. The S&P Global final Japan Services PMI rose to 53.6 in July from 51.7 in June, marking the strongest expansion since February 2025 [1][2][4][5].
The growth in new service business orders was supported by improved customer numbers, with the sector experiencing its fastest growth in three months in July [1]. However, new export orders declined for the first time since December 2024, falling at the fastest rate in over three years due to lower tourist numbers [1][2]. This decline was partly related to concerns over a potential earthquake [6]. Employment in the service sector remained unchanged, ending a 21-month streak of job growth [1][2].
Despite these export and tourism challenges, domestic demand and customer numbers fueled robust growth in service activity, and overall business activity in Japan rose slightly in July, supported by the strong performance of the service sector [1].
The July PMI reading of 53.6 indicates a strong expansion in the service sector, with a PMI reading above 50.0 indicating growth in activity, while that below 50.0 points to contraction [7]. Price pressures continued to ease in July, with input cost inflation being the slowest in 17 months, and output costs rose at the softest pace in nine months [3][4].
Some survey respondents attributed the weak tourist figures to speculative concerns about an earthquake in July [6]. Forward-looking indicators were a little less upbeat in July, according to Annabel Fiddes, economics associate director at S&P Global Market Intelligence [8]. However, she suggested that the U.S.-Japan trade deal announced last month could lift Japanese firms' confidence and consumption, offering a much-needed boost to the manufacturing economy [9].
References:
- S&P Global
- Reuters
- Nikkei Asia
- Bloomberg
- CNN Business
- The Japan Times
- Investopedia
- CNBC
- Financial Times
- The growth in Japan's service sector, despite a drop in export orders and tourist numbers, has been fueled by a strong expansion in new service business orders, bolstering overall finance activity.
- Despite the decline in new export orders, domestic demand and customer numbers have contributed to a robust expansion in the service sector, indicating a positive trend in Japan's business environment.
