Japan’s manufacturing activity reached a three and a half year high in January, with the S&P Global Japan Manufacturing PMI rising to 51.5, the strongest level since August 2022. Output and new orders grew significantly, driven by strong customer demand. New export orders expanded, and employment in the sector increased notably.

Despite the positive growth, inflationary pressures are a concern, with input costs rising sharply due to labor and raw material costs along with a weaker yen. Output prices also increased at the fastest rate in 19 months, potentially impacting customer demand and investment decisions. Business confidence dipped to a three-month low.

However, the overall outlook remains optimistic, with expectations of further production growth supported by global demand for semiconductors and automobiles. Companies are increasing their headcount to meet rising business requirements and expand capacity. The sector’s future looks bright despite some concerns about inflation and demand strength.

Read more at Yahoo Finance: Japan’s factory activity growth hits near 3-1/2-year peak, PMI shows