Japan's Service Sector Expands for Third Month Amid Strong Export Demand

Japan’s service industry continued to grow in January, supported by a rebound in export demand across Asia, according to the latest au Jibun Bank Services PMI report by S&P Global Market Intelligence. The index rose to 53.0 from December’s 50.9, marking the strongest expansion since September and surpassing the preliminary estimate of 52.7.

The sustained growth in services is helping counterbalance weakness in Japan’s manufacturing sector. New business expanded for the seventh consecutive month, reaching levels last seen in July. Companies attributed this growth to increased client acquisition and store openings. Meanwhile, new export business grew at its fastest pace since August, marking a turnaround after four months of decline.

Business confidence remained high, with firms optimistic about a broader economic recovery and rising manufacturing output. Employment also increased for the 16th straight month to support business expansion.

Despite positive momentum, rising wages and higher raw material and fuel costs drove up input prices. As a result, companies passed these costs onto consumers, leading to the highest price growth since last May.

Japan’s composite PMI, which measures both manufacturing and services activity, climbed to 51.1, indicating the strongest expansion in four months. The Bank of Japan recently raised interest rates to their highest level in 17 years and signaled the potential for further hikes due to inflation risks.

The latest PMI data underscores Japan’s resilient services sector, driven by strong demand, business expansion, and steady employment growth.