Japan’s private-sector activity expanded for a 17th consecutive month in August 2026, with the final S&P Global Composite PMI rising to 53.5 from 52.7 in July. The reading exceeded the 53.4 flash estimate and was the highest since February. A reading above 50 indicates expansion. Growth was led by another sharp increase in manufacturing output alongside firmer services activity. Total new orders rose at one of the fastest rates in three years, indicating stronger underlying demand, while employment continued to edge higher as backlogs increased and capacity pressures persisted. Input costs rose sharply across manufacturing and services, although the pace of inflation eased to its lowest since March. Selling prices, by contrast, increased at the fastest rate since the survey began in 2007, showing that companies continued passing higher costs on to customers. The final services PMI rose to 52.5 in August 2026 from the flash reading of 52.3 and July’s 51.2, marking the strongest pace since March as new orders rose at a faster pace after hitting a 25-month low in July, with growth slightly above the 2026 average, supported mainly by firmer domestic demand. In contrast, export demand continued to decline. Services new business increased for a 26th consecutive month, while new export business contracted for a fifth month. Job creation slowed to its weakest pace in a year and remained marginal. Outstanding business increased only slightly, with the rate of accumulation little changed from July’s 17-month low. Employment in services also rose for a 12th consecutive month, though the increase was marginal and the slowest pace of job creation in a year. Business confidence improved modestly from July, lifted by planned expansion, AI-related efficiency gains and expectations of stronger customer numbers, but remained subdued by recent standards. S&P Global Market Intelligence Economics Associate Director Annabel Fiddes said stronger services growth and persistent cost pressures could strengthen the case for another Bank of Japan interest-rate increase.