Japan’s manufacturing activity expanded in January for the first time in seven months, with the biggest rise in new export orders in over four years. The S&P Global flash Japan Manufacturing Purchasing Managers’ Index (PMI) increased to 51.5, marking a return to expansionary territory for the first time since June 2025. Both factory output and new orders ended their contraction streaks in January, with new export orders climbing at the fastest rate since November 2021.

Japan’s exports have been rising for four consecutive months to December, driven by resilient data-centre-related demand. The flash Japan services PMI also improved in January, reaching 53.4, the steepest increase since last July. Growing customer demand led to increased staff recruitment, with employment rising at the steepest rate since April 2019.

Both manufacturers and service firms forecast growth in future output, although optimism slightly subsided due to concerns around rising costs, global economic uncertainty, labor shortages, and an aging population. Input price inflation for manufacturers hit a nine-month high, while service providers saw a decrease from December. The Bank of Japan is expected to raise its growth forecast and signal readiness for the next rate hike to contain inflationary pressure.

Read more at Yahoo Finance: Japan’s factory activity returns to growth after seven months, PMI shows