Japan’s Manufacturing Activity Contracts Again As Export Demand Stutters Amid Trump Tariffs, S&P Survey Shows

The S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) came in at 49.9, higher than the 48.9 seen in July, but still came in below 50, which separates contraction from growth.

Japan’s manufacturing activity shrank yet again in August, with the Trump administration’s tariffs affecting demand.

The S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) came in at 49.9, higher than the 48.9 seen in July, but still came in below 50, which separates contraction from growth.

“This suggests the recovery in manufacturing output may be hard to sustain unless we see an improvement in sales in the near term,” said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence. Foreign demand for Japanese goods and services also slipped for the fifth month in a row, with both factories and service providers stating a solid drop in new export work.

Retail sentiment on Stocktwits about the iShares MSCI Japan ETF (EWJ) was in the ‘bullish’ territory at the time of writing.

The report said that average input prices faced by private sector firms in Japan rose at a sharper rate in August. However, the growth remained softer than the average seen over the first half of 2025.

Official data showed on Wednesday that Japan’s exports slipped 2.6% in July, compared to a year earlier, as U.S. President Donald Trump’s tariffs continued to hit global trade. While Japan has negotiated a lower 15% tariff rate for its goods compared to the 25% proposed by Washington, it will take at least a few weeks before the Trump administration prepares written documents for their implementation.

The August manufacturing activity report showed that the selling price did not rise as much as costs. “Intense market competition and requests from clients for discounts had dampened overall pricing power. Notably, selling prices increased at the softest rate since last October, to suggest a stronger squeeze on operating margins," Fiddes noted.

However, the composite PMI increased to 51.9 in August from 51.6 in July, aided by robust growth in the services industry.

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