Japan's private sector grew at its fastest pace in 32 months in January 2026, led by strong services demand and rebounding manufacturing.

Japan's private sector grew at its fastest pace in 32 months in January 2026, driven by a surge in services activity, with the services PMI rising to 53.7 and the composite PMI reaching 53.1—the highest since May 2023. Growth was fueled by strong demand, rising new business, and increased exports, while manufacturing output rebounded for the first time since June 2025. Employment rose across sectors, though input cost pressures eased to their lowest in nearly two years. Despite lower cost increases, selling prices climbed to a seven-month high as firms passed costs to consumers. Business confidence remained positive but edged down due to concerns over global uncertainty, labor shortages, and an aging population.