Japan’s Sept Factory Activity Falls at Fastest Pace in Six Months, PMI Shows

Reuters

10:40 JST, October 1, 2025

TOKYO, Oct 1 (Reuters) – Japan’s manufacturing activity shrank at the fastest pace in six months in September, with sharper falls in output and new orders, a private sector survey showed on Wednesday.

Companies in the survey said soft demand among key markets such as China and U.S. tariffs weighed on business performance.

The S&P Global Japan Manufacturing purchasing managers’ index (PMI) fell to 48.5 in September from 49.7 in August, remaining below the 50.0 threshold that separates growth from contraction. This marked the most pronounced deterioration since March.

The index was little changed from the flash reading of 48.4.

Manufacturers reported a steep decrease in output, linked to reduced inflows of new work, while new business fell at the fastest rate since April.

Export orders also shrank, although the pace of declines eased from August, with firms citing weaker demand from China and the impact of U.S. tariffs.

Employment growth slowed to its weakest since February, reflecting caution among firms amid subdued business confidence, which slipped to its lowest since April.

“Overall, the data indicate that unless we see a notable improvement in demand at home and overseas, it’s likely the sector will struggle to see much growth in the near-term,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence.

Input cost inflation edged up to a three-month high, driven by rising raw material and labor costs, but remained below the average seen in the first half of the year. Despite this, firms raised their selling prices at a solid pace to protect profit margins.