Japan: July PMI underscores firmer manufacturing activity

Research evidence excerpt

Japan: July PMI underscores firmer manufacturing activity

J P M O R G A N Japan Economic Research

24 July 2026

Japan: July PMI underscores

firmer manufacturing activity

Economic and Policy Research

Takuho Morimoto

(81-3) 6736-6682

takuho.morimoto@jpmorgan.com

JPMorgan Securities Japan Co., Ltd.

• Composite PMI improves in July, led by strong manufacturing output

• Solid manufacturing activity likely supported by firm AI demand and

easing supply constraints

• Services PMI softens on cost pressures, but does not suggest material

slowing

• Ongoing cost passthrough into output prices signals inflation acceleration

Japan’s July all-industry PMI rose 0.3pts to 53.1, the highest since February. The

pickup was driven by manufacturing: the output index surged 1.8pts to 56.1, the

strongest reading since 2014. Although the headline manufacturing PMI edged

down a tenth to 54.7, it beat our forecast and has remained near the upper end of

its historical range since April. Overall, the details point to improving

manufacturing momentum as supply constraints appear to be bottoming out and

beginning to ease. Services PMI slipped 0.3pts to 51.9, likely reflecting some drag

from elevated costs, but it remains consistent with continued expansion rather than

a material slowdown. Taken together, this report suggests that activity is holding

up well at the start of this quarter.

Manufacturing strength is underpinned by both demand and supply-side

improvements. New orders rose 0.6pts to 54.6 and new export orders increased

0.8pts to 54.6, among the strongest readings in this cycle, likely supported by

resilient AI- and semiconductor-related demand. The backlogs of work index also

rose 1.5pts. On supply chains, the suppliers’ delivery times index rebounded 6.5pts