Japan Service Sector Growth Slows to 11-Month Low
Japan’s service sector expanded at its slowest pace in nearly a year during April as rising costs and uncertainty linked to the ongoing Middle East conflict weighed on business sentiment, according to a private-sector survey released on Friday.
The final S&P Global Japan Services Purchasing Managers’ Index (PMI) fell to 51.0 in April from 53.4 in March, marking the weakest growth level since May of last year.
A PMI reading above 50 indicates economic expansion, while a figure below 50 signals contraction.
New Orders and Export Demand Weaken
The survey showed that new business growth slowed significantly during April.
New orders increased at the slowest pace since October, while export demand declined for the first time in five months.
Companies pointed to higher prices and uncertainty surrounding the Middle East conflict as key factors hurting customer demand and international business activity.
Rising Costs Increase Pressure on Businesses
Japanese service companies also faced sharply rising costs during the month.
Input prices increased at the fastest rate in 12 months, driven by higher fuel costs, raw material prices, and labor expenses.
Businesses responded by raising prices charged to customers, with output price inflation reaching the third-highest level recorded since the survey began in 2007.
The report highlighted growing pressure on companies attempting to protect profit margins amid persistent inflationary trends.
Business Confidence Falls to Post-Pandemic Low
Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said business confidence continued to weaken due to concerns about the war, future price increases, and softer consumer demand.
According to the survey, optimism about business conditions over the next 12 months dropped to its lowest level since August 2020 during the COVID-19 pandemic.
Employment Growth Continues but Remains Modest
Employment in Japan’s service sector increased for the eighth consecutive month in April.
However, the pace of hiring remained relatively modest and showed little change from March levels.
The survey also showed only a slight increase in backlogged work, with the rate of accumulation reaching its weakest level since March 2025.
