Japan Services Sector Hits Five-Month Growth High in August

Japan's services sector grew at its fastest rate in five months during August, according to the final Purchasing Managers’ Index (PMI) released by S&P Global Market Intelligence. The services index rose to 52.5 from 51.2 in July, while the broader Composite PMI reached a six-month high of 53.5, driven by strong domestic demand and new business activity.

Despite the overall growth, new export business contracted at the sharpest rate since November 2020. Employment continued to grow for the 12th consecutive month, although the pace of hiring was the slowest in a year. While input cost inflation eased to a four-month low, companies increased output charges at the second-steepest rate on record to pass costs to clients.

Annabel Fiddes of S&P Global Market Intelligence noted that growth momentum picked up across the service sector. These sustained cost pressures and growth trends suggest that official inflation could rise further, which strengthens the case for the Bank of Japan to implement another interest rate hike.