Japan's factory sector growth slows to six-month low in September

Japan's manufacturing sector expanded at its weakest rate in half a year, with the S&P Global PMI dropping to 54.1 in September after a reading of 54.9 the month before. Firms reported slower gains in output and new orders, noting that some customers were adjusting inventories after a period of stock buildup. Production growth fell to a three-month low, and the pace of new orders slowed to the weakest level in four months following a record-setting August.

Export orders, however, rose for a ninth consecutive month, buoyed by stronger demand across Asian economies and improved sales to the United States. Employment continued its upward trend for a 22nd month, albeit at a pace close to the recent high. Input-cost inflation eased to a six-month low, yet companies maintained aggressive price hikes, one of the sharpest since late 2022. Optimism about output over the next year remained steady, with firms citing semiconductor and AI-related demand while flagging supply disruptions and rising costs as risks.