Japan composite PMI rebounds from over two-year low

The au Jibun Bank Japan Composite PMI rose to 51.1 in April 2025, up from a final reading of 48.9 in the prior month, which had marked the lowest level since November 2022, according to flash data.

Japan composite PMI rebounds from over two-year low

This improvement signaled a recovery in business activity for the fifth time in six months, largely driven by a rebound in the service sector following a contraction in March. While manufacturing output continued to decline, the pace of the drop eased slightly, offering some relief to the sector. Notably, both new orders and employment expanded at a faster pace, signaling positive momentum, although foreign sales remained under pressure and continued to decline. Backlogs of work remained relatively stable, indicating that businesses are not facing significant bottlenecks in production or service delivery at present. On the price front, cost pressures remained persistent across both the services and manufacturing sectors, with overall input costs rising at the fastest pace in two years. In response, firms increased their selling prices to protect their profit margins, although this could have longer-term implications for consumer demand and economic growth if price increases become more widespread.

What to expect

Looking ahead, however, business confidence dipped to its lowest level since August 2020, at the height of the COVID-19 pandemic, as uncertainty surrounding the global economic outlook continued to weigh on sentiment. Factors such as trade conditions, ongoing labor shortages, and Japan’s rapidly aging population remained key challenges for businesses. With these risks on the horizon, many firms expressed caution about the future, suggesting that any economic recovery may be slow and uneven as these structural issues continue to limit growth potential.