Japan’s private sector growth accelerates at start of Q2

Japan’s private sector kicked off the second quarter with a burst of growth, fueled by a booming service sector and a slowdown in manufacturing’s decline, according to flash PMI data released by S&P Global on Tuesday.

The au Jibun Bank Flash Japan Composite PMI, a key indicator of overall business activity, rose to 52.6 in April from 51.7 in March.

This marks the fastest rate of growth in 11 months, matching the level seen last August. A reading above 50 suggests expansion in the sector.

The positive momentum was driven primarily by the service sector, where new business growth surged to its quickest pace in nine months.

The survey’s New Orders Index also signaled improvements in demand conditions, offering a further optimistic outlook for the Japanese economy.

However, a potential concern emerged alongside the positive growth signals. The survey’s gauge of selling prices indicated a faster rate of inflation in March despite lower costs feeding through the manufacturing sector.

This suggests that inflationary pressures are now being driven more by the service sector, potentially linked to rising wage growth.

The latest PMI data suggest that inflation could climb towards two per cent in the coming months, potentially prompting the Bank of Japan (BoJ) to consider another interest rate hike.