TOKYO, April 3 - Japan’s services sector expanded in March at its slowest pace in three months, weighed down by escalating uncertainty over the Middle East war.
The S&P Global final Japan Services Purchasing Managers’ Index (PMI) dropped to 53.4 from February’s 21-month high of 53.8. Despite the decline, the index remained above the 50 threshold for growth, marking a twelfth straight month of expansion.
New business climbed at the weakest rate since December, though new export orders picked up slightly. Business confidence slumped to its lowest level since September 2020, driven by concerns over the war’s impact on global demand and inflation.
Input prices surged at the fastest pace in nearly a year, fueled by rising costs for raw materials, energy, and fuel tied to Middle East tensions. Output charge inflation, however, eased from February’s near 12-year peak.
Employment growth slowed to a five-month low, with companies citing staffing shortages and voluntary departures.
Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, noted: “Uncertainty over how long the Middle East war might continue was a key factor driving down business confidence in March.”
The broader Composite PMI, covering both manufacturing and services, dipped to 53.0 from February’s 33-month high of 53.9, signaling a moderation in overall economic activity.