Japan’s manufacturing sector recorded its strongest improvement in nearly three-and-a-half years in January 2026, with the S&P Global Manufacturing PMI rising to 51.5 from 50 in December. The expansion marked the first improvement in operating conditions since June 2025 and the strongest PMI reading since August 2022, signalling a clear return to growth momentum.

The rebound was driven by a return to growth in new orders, which expanded for the first time since May 2023 and at the fastest pace in nearly four years. Firms cited stronger customer demand and new product launches as key drivers of improved sales. New export orders also increased for the first time since February 2022, supported by firmer demand from major markets such as the United States and Taiwan, S&P Global said in a press release.

Japan’s manufacturing sector returned to growth in January 2026, with the S&P Global PMI rising to 51.5, its strongest reading since August 2022.
New orders and exports expanded for the first time in years, lifting output, employment and purchasing activity.
However, rising input costs and selling prices signalled intensifying inflationary pressures despite improving demand conditions.

Improved demand conditions translated into higher factory output, with production rising for the first time since June 2025. Although the pace of expansion remained modest, it was the strongest since April 2022 and exceeded the long-run average.

Rising workloads also placed fresh pressure on capacity. Backlogs of work increased for the first time in three-and-a-half years, prompting manufacturers to step up hiring. Employment rose at the fastest rate since September 2022, as companies sought to rebuild capacity and prepare for further increases in output.

Purchasing activity also picked up, reflecting more positive expectations for the year ahead. Business conditions improved across all three monitored manufacturing sub-sectors, led by investment goods producers.

However, the survey highlighted growing inflationary pressures. Input costs rose at the quickest pace in nearly a year, partly reflecting the recent weakening of the yen, while selling price inflation climbed to a 19-month high, as firms passed higher costs on to customers.

“Japan’s manufacturing industry propelled itself back into growth territory at the start of 2026, with firms signalling the strongest upturns in output and new orders for nearly four years. Furthermore, new export business expanded for the first time since the start of 2022, to suggest a broad-based improvement in demand conditions,” said Annabel Fiddes, economics associate director at S&P. “More positive news was seen for employment, which rose to the greatest extent since September 2022, as firms sought to build capacity. Combined with a fresh rise in purchasing activity and upbeat expectations for the year ahead, the data suggest the sector is gearing up for further increases in output in the months ahead.”

“However, inflation remained a key area of concern for businesses. Input costs rose at the quickest pace in nearly a year, partly due to the recent weakening of the yen, leading to a sharper rise in selling prices. It will be important to monitor the prices data to see if these inflationary pressures intensify, as this could impact customer demand and firms’ own investment decisions,” added Fiddes.

Fibre2Fashion News Desk (SG)

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UK exporters continue to face sustained pressure amid a prolonged slump in overseas demand, fuelling renewed calls for an urgent reset in UK–EU trade relations. Only 21 per cent of businesses reported an increase in export orders in Q4 2025, down sharply from 31 per cent in Q2 2018, according to a new survey by the British Chambers of Commerce (BCC).

Half of exporters saw no change in orders, while 28 per cent reported a decline, highlighting the scale of the challenge facing UK trade. Smaller firms have been disproportionately affected. Just 19 per cent of small and medium-sized enterprises (SMEs) reported rising export orders, compared with 39 per cent of companies employing more than 250 people, the BCC’s Trade Confidence Outlook showed.

Micro-exporters with fewer than ten employees fared worst, with only 17 per cent reporting growth, while 30 per cent saw a fall in orders.

UK exporters remain under sustained pressure as overseas demand weakens, renewing calls for an urgent UK-EU trade reset.
Only 21 per cent of firms reported higher export orders in Q4 2025, down from 31 per cent in 2018, according to BCC.
SMEs and micro-exporters were hit hardest, while large firms performed better, reflecting deepening structural challenges despite post-pandemic recovery efforts.

“For smaller businesses, the last seven years have been some of the most challenging ever to try and grow exports. Things started to take a turn for the worse as the trade implications of Brexit became clear in 2018 and they have been in the doldrums ever since,” said William Bain, head of trade policy at the BCC. “A succession of further shocks on top of that—from COVID, wars, supply chain disruption and tariffs—have turned exporting into an uphill slog where the path keeps getting steeper.”

“The Prime Minister’s trip to China and the real progress made on trade deals with the US, EU and India last year show the government understands the difficulties. But we need to see a real focus in 2026 on delivering what has been agreed. The BCC’s EU reset report sets out very clearly the big issues that must be tackled before the year is out,” added Bain.

A survey of more than 2,000 exporters highlighted the sustained impact of Brexit, COVID, geopolitical tensions and tariffs on UK export performance. Since 2018, fewer than 28 per cent of firms have reported higher export orders, with the figure averaging just 22 per cent since late 2024, despite the post-pandemic recovery. The data was collected between November 10, and December 8, 2025.

Fibre2Fashion News Desk (SG)