Japan’s Service Sector Growth Slows in December, PMI Shows

Reuters

10:52 JST, January 7, 2026

TOKYO, Jan 7 (Reuters) – Japan’s service sector expanded at its slowest pace since May in December, as softer overall demand countered a rebound in new export businesses, a private sector survey showed on Wednesday.

The S&P Global final Japan Services Purchasing Managers’ Index (PMI) fell to 51.6 in December from 53.2 in November, worse than a flash reading of 52.5 but remaining above the 50.0 line that separates growth from contraction for the ninth consecutive month.

While foreign demand for Japanese services returned to expansion for the first time since June, new orders rose at a slower rate, the survey showed.

Input costs rose at the fastest pace since May, driven by higher prices for raw materials, staff and fuel as well as construction costs that prompted a significant rise in output charges.

“Input prices continue to be a major concern for businesses,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence. “Companies face a difficult balance of passing on higher costs to clients where possible to ease pressure on margins, but also staying competitive to support sales.”

Still, Japan’s service sector saw staff numbers rising at the fastest rate in over two-and-a-half years, thanks to higher sales and the filling of long-held vacancies, according to the survey.

Business confidence for the next 12 months also remained strong, as firms were hopeful that new product launches, store openings and improved demand especially in transport and information technology sectors would boost sales.

The final S&P Global Japan Composite PMI, which includes both services and manufacturing, declined to 51.1 in December from 52.0 in November, reflecting the service sector’s softest rate of growth in seven months even as manufacturing output stabilized after a period of decline.