Japan's manufacturing slowdown eases, but mixed signals for 2026
Japan's manufacturing sector shrank less than expected in December 2025, with the PMI rising to 49.7—still not quite in growth mode, but better than last month and forecasts.
Meanwhile, the services sector cooled off a bit, nudging the overall economic activity down slightly.
What's happening on the ground?
Factories are still seeing small declines, but new orders dropped at their slowest pace in a year and a half—so things might be stabilizing.
Jobs are picking up faster than they have since mid-2024, and companies are raising prices more quickly.
Even though big manufacturers feel more optimistic than they have in four years, many expect tougher times ahead thanks to higher US tariffs and weak spending at home.
Why does this matter?
If you're watching global markets or just curious about where Japan's economy is headed in 2026, these trends matter.
The manufacturing sector might be turning a corner, but slower growth in services could drag things down—something likely to attract the attention of investors and policymakers, including those at the Bank of Japan.