Preliminary data from au Jibun Bank reveals that Japanese business activity contracted in March, marking a break in growth momentum after five months. The manufacturing PMI dropped to 48.3 from 49.0, indicating a contraction due to weaker overseas demand.

Japan’s services sector also showed signs of contraction for the first time since mid-2024, with services PMI decreasing from 53.7 to 49.5, primarily driven by declining domestic demand amidst inflationary pressures.

The composite PMI fell from 52.0 to 48.5, reflecting the cooling of the Japanese economy influenced by reduced private spending and uncertainties around U S trade policies.

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Conclusion

Japan’s recent contraction in activity highlights the challenges faced due to weak demand and rising inflation, which are critical factors for investor consideration as they navigate future investment decisions.