PMI data shows that the growth of Japan's services sector has slowed under cost pressures.

A recent survey indicates that due to weakened demand and significant cost pressures on businesses, the expansion pace of Japan's service industry slowed in July, with sales price inflation reaching the highest level since April 2014. The S&P Global Japan Services Purchasing Managers' Index final reading for July was 51.2, down from 52.2 in June, and also below the initial estimate of 51.9. This marks the second consecutive month that the index has remained in the expansion zone, but the growth rate is much lower than earlier in 2026. An index above 50 indicates industry activity is expanding, while below 50 indicates contraction. The growth rate of new business fell to a two-year low. Japan's service industry has seen a decline in overseas demand for the fourth consecutive month, although the rate of contraction has narrowed compared to May and June. Cost pressures remain high, with the increase in input prices slightly below the four-year high set in June. The survey reported that respondent companies cited inflationary pressures from the Middle East situation, rising labor costs, and the depreciation of the yen as the main driving factors.