Fashion
Japan factory activity stabilises after 5 months of contraction in Dec
New business declined at its slowest pace in 19 months, marking the weakest reduction since May 2024. While overall demand remained subdued, some manufacturers reported improved sales supported by new projects and stronger-than-expected customer spending. Output was broadly stable, with production falling only marginally at the slowest pace in the current six-month downturn, S&P Global said in a press release.
Employment continued to expand, with firms increasing staffing levels at the fastest rate in four months, often in anticipation of stronger demand ahead. This helped reduce outstanding business, although the pace of backlog depletion eased to its slowest level in 18 months. Purchasing activity fell only marginally, while manufacturers continued to run down inventories amid muted demand conditions.
Japan’s manufacturing sector stabilised in December 2025 after five months of decline, with the S&P Global PMI rising to the neutral 50 from 48.7 in November.
New orders fell at the slowest pace in 19 months, output was broadly stable, and employment increased.
However, input costs surged at the fastest rate since April, lifting selling prices despite subdued demand.
Supply-side pressures persisted, as delivery times lengthened due to material shortages and extended shipping times, though the deterioration in vendor performance remained modest. Sub-sector data showed improved conditions for consumer and investment goods producers, while intermediate goods manufacturers faced weaker performance.
Cost pressures intensified notably in December. Input prices rose at the fastest pace since April, driven by higher raw material and labour costs, as well as the impact of a weak yen. As a result, manufacturers raised output charges again at a solid pace to protect margins.
Business confidence dipped from November’s recent high but remained above the long-run average. Firms continued to express optimism about the year-ahead outlook, citing hopes of new product launches and a recovery in customer demand during 2026, despite ongoing concerns around global economic conditions, rising costs, and demographic challenges.
“Japan’s manufacturing industry saw conditions stabilise at the end of the year, with factories reporting a much weaker reduction in sales and largely steady production levels,” said Annabel Fiddes, economics associate director at S&P Global Market Intelligence. “There was also good news on the employment front, with staffing levels rising at a slightly quicker pace as firms projected greater demand in the months ahead.”
“There were signs of stronger cost pressures in December, with input prices rising at the sharpest rate since April as higher raw material and labour costs, along with a weak yen, pushed up expenses. This led firms to raise their charges solidly as they looked to ease pressure on margins,” added Fiddes.
Fibre2Fashion News Desk (SG)